Public Debt: Constitutional Limit Needed?

The question of whether there should be a constitutional limit on public debt is a highly debated topic, with scholars, politicians, and legal experts offering differing perspectives. The debt ceiling, or debt limit, refers to the maximum amount of debt that a government can accrue, and it has been a point of contention in the United States. Some argue that the debt ceiling law is unconstitutional, citing Section Four of the 14th Amendment, which states that the validity of the public debt of the United States...shall not be questioned. On the other hand, administrations of Presidents Barack Obama and Joe Biden have rejected relying on legal arguments against the constitutionality of the debt ceiling. The practical implications of reaching the debt ceiling are severe, as it could lead to a default on legal obligations, causing a financial crisis and threatening the economic stability of the country. Congress has repeatedly acted to raise or temporarily extend the debt limit to avoid such catastrophic consequences. The debate surrounding a constitutional limit on public debt involves complex economic and legal considerations, with proponents and opponents offering valid arguments.

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The US government has consistently run a budget deficit since 2002

The US federal government has consistently run a budget deficit since 2002, borrowing to finance the spending that has been legally authorized in the federal budget. A budget deficit occurs when the government's spending exceeds its revenues. Economists debate the merits of running a budget deficit, and there is no one agreed-upon situation where a deficit is considered good or bad. Generally, a deficit is a byproduct of expansionary fiscal policy, which is designed to stimulate the economy and create jobs. If deficit spending achieves that goal within reasonable parameters, many economists would argue that it has been successful.

The US national debt was at $33.2 trillion when the fiscal year 2023 ended on September 30, 2023. Budget deficits add to the national debt, while budget surpluses help to reduce it. The size of the national deficit or surplus is largely influenced by the health of the economy and spending and revenue policies set by Congress and the President. The health of the economy is often evaluated by the growth in the country's gross domestic product (GDP), fluctuations in the nation's employment rates, and the stability of prices. When the economy is doing well, the government collects more in revenue.

The debt limit, or debt ceiling, is the total amount of money that the US government is authorized to borrow to meet its existing legal obligations. Congress has acted 78 times since 1960 to raise, extend, or revise the debt limit, with 49 of those times being under Republican presidents. The debt ceiling does not authorize new spending commitments but allows the government to finance existing legal obligations. Failing to increase the debt limit would cause the government to default on its legal obligations, which would have catastrophic economic consequences.

Many scholars argue that the debt ceiling law is unconstitutional, pointing to Section Four of the 14th Amendment of the US Constitution, which states that "the validity of the public debt of the United States...shall not be questioned." They argue that it was unconstitutional for Congress to pass the debt ceiling law, as the law does not provide a clear way for the US to pay its debts. However, the administrations of Presidents Barack Obama and Joe Biden have rejected relying on legal arguments against the constitutionality of the debt ceiling.

The US Constitution states that the validity of the public debt...shall not be questioned

The US Constitution's Fourteenth Amendment, passed in 1866 and ratified in 1868, includes a Public Debt Clause, which states: "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned." This clause was added in the aftermath of the Civil War, primarily to prevent representatives from former Confederate states from attempting to repay their war debts from the Treasury.

The Public Debt Clause has broader implications, however. Some legal scholars interpret it to mean that any law imposing a limit on the total amount of money the federal government can borrow is unconstitutional. They argue that the debt ceiling law implicitly requires a default, as it does not provide a clear way for the US government to pay its debts. This interpretation has been supported by various politicians and legal scholars, including President Bill Clinton and Harvard University's Laurence Tribe.

In contrast, the administrations of Presidents Barack Obama and Joe Biden have rejected relying on legal arguments against the constitutionality of the debt ceiling. Obama stated in 2011 that his lawyers "were not persuaded that that is a winning argument." Biden's Treasury Secretary, Janet Yellen, described this strategy as "legally questionable" in 2023. Biden himself suggested that he would consider invoking the 14th Amendment to pay government debts but questioned the practicality of this approach.

The practical consequences of failing to increase the debt limit would be severe. It would cause the government to default on its legal obligations, leading to another financial crisis and threatening the jobs and savings of Americans. Since 1960, Congress has acted 78 times to raise, temporarily extend, or revise the debt limit, demonstrating a bipartisan recognition of the necessity of these actions.

The debt limit does not authorise new spending commitments

The debt limit, or debt ceiling, is the maximum amount of debt that the US Department of the Treasury can issue to the public or other federal agencies. The debt limit does not authorise new spending commitments. Instead, it allows the government to finance existing legal obligations that Congresses and presidents of both parties have made in the past. These include Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments.

The debt limit is separate from the United States budget process, and raising the debt ceiling does not directly increase or decrease the budget deficit, and vice versa. The debt ceiling does not directly limit the size of the budget deficit; rather, it limits the amount the Treasury can borrow to pay this already-authorised spending. The Treasury can use extraordinary measures authorised by Congress to temporarily suspend certain intragovernmental debt, allowing it to borrow to fund programs or services for a limited amount of time after it has reached the ceiling.

The US government needs to borrow money to pay its bills when its ongoing spending activities and investments cannot be funded by federal revenues alone. The national debt enables the federal government to pay for important programs and services, even if it does not have the funds immediately available.

Many scholars argue that debt ceiling law is unconstitutional, and there is no legal basis for the US government to default on its debt. They point to Section Four of the 14th Amendment of the United States Constitution, which states that "the validity of the public debt of the United States...shall not be questioned." However, the administrations of Presidents Barack Obama and Joe Biden have rejected relying on legal arguments against the constitutionality of the debt ceiling.

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The Treasury can use extraordinary measures to temporarily suspend debt

The debt limit is the total amount of money the US government is authorised to borrow to meet its existing legal obligations. These include Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments. The debt limit does not authorise new spending commitments. It simply allows the government to finance existing legal obligations.

Once the debt limit is reached, federal spending would be limited to the amount of revenue coming in. To avoid breaching the limit immediately, the Treasury can draw down on its existing cash balance and invoke extraordinary measures to free up space to continue borrowing. Such measures will only be effective for a few months. Eventually, legislation would have to be passed to raise or suspend the ceiling for the Treasury to continue meeting its spending obligations.

Extraordinary measures include declaring a "debt issuance suspension period" for the Civil Service Retirement and Disability Fund, as well as the Postal Service Retiree Health Benefits Fund. The Treasury's declaration of a debt issuance suspension period applies only to those two funds and allows the agency to suspend new investments and redeem certain existing investments in the funds earlier than scheduled.

Other measures include suspending reinvestment in the Government Securities Investment Fund (G Fund), a retirement fund for federal employees. During a debt limit impasse, the Secretary of the Treasury can determine that the fund not be fully reinvested, freeing up space under the debt limit. The Treasury can also halt the daily reinvestment of the Exchange Stabilization Fund (ESF), an account used for certain currency-related operations.

While extraordinary measures are only a temporary solution to a debt ceiling impasse, they can often delay the restrictions imposed by the statutory limit by several months. During the debt limit impasse of early 2023, for example, such measures prevented the federal government from defaulting on its debt. The debt limit was reached in January 2023, and extraordinary measures enabled the government to continue meeting its obligations until legislation suspending the limit was passed on June 3, 2023.

The US has carried debt since its inception

The US national debt is the amount of money the federal government has borrowed to cover the outstanding balance of expenses incurred over time. In a fiscal year, when spending exceeds revenue, a budget deficit occurs, and the government borrows money by selling marketable securities such as Treasury bonds, bills, and notes. The national debt includes this borrowing, along with interest owed to investors. The debt limit is the total amount of money the US government is authorized to borrow to meet its existing legal obligations, and it does not authorize new spending commitments.

Since 1960, Congress has acted 78 times to raise, extend, or revise the debt limit, with 49 of those actions occurring under Republican presidents and 29 under Democratic presidents. However, the debt ceiling law has been deemed unconstitutional by many scholars, who argue that there is no legal basis for the US government to default on its debt. They point to Section Four of the 14th Amendment, which states that "the validity of the public debt of the United States...shall not be questioned." Despite this, the administrations of Presidents Barack Obama and Joe Biden have rejected relying on legal arguments against the constitutionality of the debt ceiling.

The US national debt was over $36.2 trillion as of May 2025, and it continues to grow due to increased government spending and the failure to raise taxes. The debt-to-GDP ratio is a critical indicator of a country's ability to repay its debt, and the US ratio has been above 77% since 2009, indicating a significant slowdown in economic growth. The national debt enables the federal government to pay for important programs and services, such as Social Security, healthcare, education, infrastructure, and national defense.

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