I saw a reference to the 14th amendment in the news today. What could that have to do with the US debt ceiling crisis? Could somebody explain please.

closed as off-topic by JoeTaxpayer Mar 7 '17 at 22:58

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    Is this a Personal Finance question? This seems like a law/political question. – Greg Jul 28 '11 at 14:07
  • @Greg I asked myself the same question. I think there are clear implications to personal finance. This is a political crisis making many folks nervous -- US debt is supposed to be utter safe from an investment POV. – duffbeer703 Jul 31 '11 at 13:24
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    I'm voting to close this question as off-topic because it's not PF question. – JoeTaxpayer Mar 7 '17 at 22:58

It's a disturbing development -- someone is floating the idea that the executive has the ability to issue debt without the consent of congress to measure the public's reaction.

Why disturbing? Because people are using language like this:

The president, moreover, can move quickly, but court cases take time. “At the point at which the economy is melting down, who cares what the Supreme Court is going to say?” Professor Balkin said. “It’s the president’s duty to save the Republic.”

The implication to your personal finances is that we continue to live in interesting times, and you need to be aware of the downside risks that your investments are exposed to. If your portfolio is built around the idea that US government obligations are risk-free, you need to rethink that.

  • I actually find it very interesting to hear what the Supreme Court has to say. If my understanding is correct - then the debt ceiling is unconstitutional if it leads to a default on obligations. But I'm not a lawyer:-) – littleadv Jul 28 '11 at 5:54
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    I'm not either, but it's clear that the Constitution does not give the president the power to prevent default -- it invests the "power of the purse" with Congress, not the executive. Regardless of circumstance or party, giving the President the power declare an "insurrection" in an arbitrary and capricious manner is not consistent with democratic government. It will be a sad day when the United States follows the path taken by Venezuela. – duffbeer703 Jul 28 '11 at 12:34
  • one can argue that an unconstitutional law is null and void and must not be followed. If the "debt ceiling" limitation is unconstitutional - it must not be followed, in fact that would be Congress declaring insurrection, not the President, as the Congress is limited by the same Constitution. – littleadv Jul 28 '11 at 18:05
  • @littleadv Acknowledging the validity of a debt doesn't mean that you'll pay the debt in a timely manner. Debtors in bankruptcy routinely reaffirm debts which they intend to repay. Let's be real here -- it's clear that that language was placed there to prevent the Southern congressional delegation from invalidating Union war debts after the interim military governments were withdrawn from the South. – duffbeer703 Jul 29 '11 at 16:31
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    @littleadv Please don't interpret my comments as an endorsement of the irresponsibility of the House leadership playing a game of chicken with the faith and credit of the nation. The appropriate time to set budgets is during the budget process -- not by manipulating the process of obscure, almost ministerial actions. The actions of the extremists on both sides of the argument are dangerous and borderline treasonous, and could spark a financial panic. – duffbeer703 Jul 29 '11 at 16:35

Section Four of the amendment reads:

The validity of the public debt of the United States, authorized by law, including debts incurred for payments of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.

In other words, if President Obama wants to, he could unilaterally invoke this provision and go ahead and get the money he needs.

Good articles describing this in some detail can be found here and here.

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    I think it is a moot point. Obama said ... at a town hall meeting that he'd talked to his lawyers and they "are not persuaded that that is a winning argument." miamiherald.com/2011/07/27/2334016/… – JohnFx Jul 28 '11 at 0:36
  • @JonFx - they can talk about that at length at the Supreme Court session on this matter, but that would probably be scheduled after the 2012 elections anyway. I'm pretty sure that Obama will actually do that as the last resort. – littleadv Jul 28 '11 at 5:52
  • @John. Same quote is in one of the links I provided. Note: I'm not saying I'm for or against it, simply answering the OP's question. Cheers, – gef05 Jul 28 '11 at 10:46
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    Congress is the only entity allowed to incur debt on behalf of the United states( USC section 8). Any debt incurred above that which hs been authorized would not be covered by this as it would not be authorized by law. – user4127 Jul 29 '11 at 16:24

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