John Perry, a wealthy patriot, boosted the American war effort in 1918 by subscribing to the Fourth Liberty Loan. For $10,000, he bought a bond payable in 1934 “in United States gold coin of the present standard of value.” By Perry’s calculation of the price of gold, that meant that in 1934 he was entitled to a payback in the value of $16,931.25.
Unfortunately for Perry, U.S. dollars were no longer backed by gold in 1934, and there were no legal gold coins. Among the effects of the Great Depression was radical deflation—as money got scarcer, those who still had dollars could buy more goods and services than before the crash. So, on June 5, 1933, Congress passed a Joint Resolution declaring such “gold clauses” invalid. Congress resolved that from 1933 on, “gold clause” or not, U.S. bonds were repayable only by legal tender. Perry thus would get $10,000 in paper money.
Perry did what any self-respecting wealthy patriot would do when his country is in extremis—he sued the government. When his case reached the Court, an opinion by Chief Justice Charles Evans Hughes stated that, sure enough, the government was obliged to pay the bond:
The Fourteenth Amendment, in its fourth section, explicitly declares: ‘The validity of the public debt of the United States, authorized by law, * * * shall not be questioned.’ . . . We regard it as confirmatory of a fundamental principle which applies as well to the government bonds in question, and to others duly authorized by the Congress, as to those issued before the amendment was adopted. Nor can we perceive any reason for not considering the expression ‘the validity of the public debt’ as embracing whatever concerns the integrity of the public obligations.
Great news for Perry—except that the Court then went on to hold that the debt owed Perry was, in fact, payable in 1934 paper dollars, not the value it would have in gold coins. Legal tender is legal tender, and gold wasn’t it anymore.
We can draw two lessons from this now-obscure case. From the opinion, we glean that, even seven decades after the enactment of the Fourteenth Amendment, its requirement that the public debt “not be questioned” bound the government in all its obligations.
From the larger circumstances of the case, however, we can glean another. As constitutional historian Gerard Magliocca laid out in a fascinating 2012 article, a contrary decision by the Court—requiring repayment in the value of gold—might have been a near-death experience for the Court and the Constitution. That’s because President Franklin Roosevelt, convinced that returning to the gold standard would plunge the economy even further into depression, had already determined that he would not follow a Supreme Court decision reaffirming the gold clause.
Roosevelt and his staff had prepared a “fireside chat” script that would have said, “To stand idly by and to permit the decision of the Supreme Court to be carried through to its logical, inescapable conclusion would so imperil the economic and political security of this nation that the legislative and executive officers of the Government must look beyond the narrow letter of contractual obligations, so that they may sustain the substance of the promise originally made in accord with the actual intention of the parties.” In effect, he said that however the courts read the Constitution, a conscientious president would not carry through any decision that would wreck the nation.
As the clock ticks off the remaining minutes before the United States suffers a politically engineered default on its debt, I desperately hope that the Biden administration has learned both lessons of Perry. First, default on the debt (which would occur if Congress does not raise the “debt ceiling” provided by statute) is flatly forbidden by the Constitution. Second, a President must sometimes contemplate defying the other branches to save the country from disaster.
I have been writing about the debt ceiling for the past 12 years, and my position, once dismissed as a fringe theory, has now gone mainstream. (Just this week, the redoubtable Laurence Tribe of Harvard, who scorned the argument in 2011, has clambered aboard the anti-repudiation bandwagon. I am now awaiting an apology from former Representative Barney Frank, who in 2011 accused me of believing Elvis is still alive.) For those who just tuned in, I’ll explain quickly: the interest due on U.S. bonds does not come from new spending but from money already appropriated by Congress and spent by the executive branch. Failure to raise the “debt ceiling” will not reduce the national debt by one penny; it will force a default on existing debt, the first ever. That will, in turn, decimate the credit of the U.S. government, tank the domestic economy, boost interest rates worldwide as investors demand guarantees against future defaults, and, because the dollar is the world’s reserve currency, spark a worldwide financial crisis like that of 2008 and even perhaps a downturn like that of the 1930s. It will also violate Section Four of the Fourteenth Amendment, which (as the Perry Court noted) provides that “The validity of the public debt of the United States, authorized by law, . . . shall not be questioned.”
If, that is, the president obeys the debt ceiling. I hope that he is following Roosevelt’s example—that the executive order setting it aside has already been written for signature if needed, along with a speech explaining it to the nation. Congressional fecklessness—caused by an extreme Republican caucus with the slimmest majority in only one house—cannot supersede the Constitution. The case for presidential authority in the face of actual default is much stronger than Roosevelt’s would have been. Biden has a constitutional text he can cite.
In the current case, there’s some reason to hope that the Supreme Court would choose to stay out of any dispute over the lawfulness of repaying the debt. To begin with, who would have what the courts call “standing to sue”? Standing is supposed to arise from an “injury in fact,” meaning some harm the challenged action is having that is particular to this particular plaintiff or plaintiffs. “I don’t agree with this,” “I think it’s unconstitutional,” or even “Let’s go, Brandon!” are not supposed to be enough to generate standing.
But as with so much else, all bets are off in the aggressive post-Trump Supreme Court. The majority has shown that “standing” can be manufactured when they don’t like something the government is doing. In West Virginia v. Environmental Protection Agency, the climate policy case, red states were allowed to challenge a 2015 climate policy that had never gone into effect and could not ever go into effect because of changes in the energy industry. (The majority reasoned that those sneaky bureaucrats at the EPA might at some point start to think about doing something in some way similar, so the case was on.) In a current case pending this term, 303 Creative v. Elenis, the Court has permitted a Christian web designer to challenge a state civil rights law on the grounds that, at some point, she might decide to offer wedding website design services. If she did decide to offer them, a same-sex couple might ask her to do one, and if they did ask her, and if she refused because designing pages for same-sex couples would violate her faith, and if the law were then applied to her, this would provide an injury. So, it is quite possible the conservative supermajority could decide that Brandon needed a good slap across the face and thus manufacture standing for some red state attorney general or right-wing advocacy group to challenge Biden’s upholding the full faith and credit of the United States.
That brings us to the next somber contingency: The rise of Republican extremists is forcing the nation into a crisis not paralleled at least since 1937. If the Court becomes a party to this high crime, Biden should be prepared to defy its order to default.
Those are foreboding words to type. For someone like me who has spent a career studying the workings of the Constitution, contemplating a step outside it is a bit like trying to imagine one’s own death. Would one, in good conscience, advise a president in this situation to refuse to obey the Court?
I discussed the question in general terms with Louis Michael Seidman, the Carmack Waterhouse Professor of Law at Georgetown Law Center. In 2013, Seidman published a small book, On Constitutional Disobedience, which steps outside the ordinary framework and assesses the argument for and against regarding the Constitution as binding on present-day actors. Seidman didn’t offer any opinion on my Section 4 theory. But for a president who agrees with me, paying the debt would not be disobeying the Constitution—it would be obeying it and insisting that doing so supersedes the intervention of any other branch. “If you believe in obeying the Constitution,” he said, “obeying the Supreme Court might be constitutional disobedience.”