As we approach another debt limit deadline, the idea that the president should use language of the 14th amendment (“the validity of the public debt of the United States, authorized by law, . . . shall not be questioned”) to ignore the debt limit has been raised again, this time most prominently by House minority leader Nancy Pelosi. The idea, it appears, is that the 14th amendment language enable the president to issue debt in order to pay the nation’s bills even though the debt exceeds the congressionally established limit. Recently, the administration has said that White House lawyers have not found the argument persuasive and thus that the president would not be pursuing this option. However, that’s not the only reason the 14th amendment caper was never viable.
Much of the debate about this issue has been among lawyers interpreting the text and history of the 14th amendment and, as interesting as this might be for lawyers, it is a waste of their and everybody else’s time; the very fact that there is uncertainty about the meaning of the phrase guarantees that the provision will never be used.
US government debt is frequently referred to as “risk free,” and it is so in substantial part because its legal validity as an obligation of the United States is not in doubt. However, the existence of a debate about the meaning of the 14th amendment as authority for bypassing the debt limit nullifies the risk free character of the debt that would be issued under that constitutional provision.
In other words, even if the debt were to be issued, there would be no buyers unless the interest rate were high enough to compensate for the uncertainty about its validity. That rate would probably have to be quite high, given the fact that the debt would be worthless if the Supreme Court were ultimately to determine that it was issued in violation of the law.
Indeed, the yield on all US government debt would probably rise after the issuance of a questionable debt instrument, as investors began to doubt the sanity of those in charge at the Treasury.