Clearing the Air on the Debt Limit
Congressional research reportNov 10, 2021
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Clearing the Air on the Debt Limit
Updated November 10, 2021
Congressional Research Service
https://crsreports.congress.gov
R45011
Clearing the Air on the Debt Limit
Summary
As Congress considers how to reconcile rising federal debt levels and the debt limit, discussions
about the role of the debt limit among Members of Congress, researchers, and the media promise
to become more frequent. During debt limit episodes in the last decade, misleading or inaccurate
claims have, at times, surfaced. This report clarifies five issues commonly raised in debt limit
debates and explores some open questions. Some of those points in need of clarification relate to
the congressional power of the purse, which stems from three closely related constitutional
provisions that charge Congress with deciding how the federal government spends, taxes, and
borrows.
The Bipartisan Budget Act of 2019 (BBA 2019; P.L. 116-37), enacted in August 2019, had
suspended the debt limit through July 31, 2021. The limit was then raised to just over $28.4
trillion to accommodate debt accumulated during the suspension, as specified in BBA 2019.
The statutory debt limit represents one way that Congress has exerted control over federal
borrowing and debt, as it has since the beginning of the U.S. government—despite claims that
limits on debt began in 1917. Before 1917, Congress typically specified the interest rates,
maturities, call options, and other aspects of debt issuances. The Second Liberty Bond Act of
1917 (P.L. 65-43, 40 Stat. 288) marked a turning point in federal debt policy. The modern debt
limit—meaning an overall limit on federal debt without sublimits—was established in 1939.
Some claim the U.S. government suffered technical defaults in the late 1970s. In October 1977
and April 1979, a lapse in temporary debt limit increases left federal debt above its limit for a few
days. Payments continued and thus no default occurred in the ordinary sense of that term. A
month after the April 1979 episode, payments to some small investors holding Treasury securities
were delayed. Computer problems, rather than the debt limit, seem the proximate cause of those
delays. Anticipation of changes in Federal Reserve monetary policies seems to be a more
plausible explanation of market interest rate increases on the date of the first payment delay.
Others have claimed that debt limit increases were once less contentious or that debt limit
modifications were typically “clean”—that is, not attached to other legislative provisions.
Assessing trends in the contentiousness of the debt limit may be challenging, and even “clean”
measures may have been preceded by sharp negotiations. Debt policy has often been a divisive
issue since the beginning of American government. Many of the debt limit measures enacted in
past decades engendered substantial division and debate. Debt, by its nature, allows government
to shift the fiscal burden of current expenditures or lessen the burden of current taxes by
transferring obligations to future taxpayers. Moreover, debt limit measures have been informally
or formally linked with other issues for many decades.
Some commentators have pointed to a statutory provision that allows minting of platinum coins
as a purported solution to the prospect of a binding debt limit. Proponents of the platinum coin
strategy have encouraged the U.S. Treasury to consider minting a high denomination coin,
which—according to proponents—could be deposited at the Federal Reserve and exchanged for
cash for the U.S. Treasury’s general fund. The platinum coin strategy, however, would present
several major policy challenges. Treasury officials have consistently rejected such proposals.
Other commentators have questioned the constitutionality of the statutory debt limit under the
Public Debt Clause of the Fourteenth Amendment. The Supreme Court has examined the Public
Debt Clause only once, and questions remain concerning its effect on Congress’s decision to set a
dollar limit on certain debts.
Congressional Research Service
Clearing the Air on the Debt Limit
Contents
Point of Clarification 1: The United States Had Debt Limits Before 1917 ..................................... 2
Point of Clarification 2: Did the Federal Government Default in the 1970s? ................................. 3
Lapse of Temporary Debt Limit Increase in October 1977 ....................................................... 3
Incidents in 1978 and 1979 ....................................................................................................... 6
Payment Delays in Spring 1979 ................................................................................................ 7
Responses to Debt Limit Lapses in the 1970s........................................................................... 8
Point of Clarification 3: Were “Clean” or Less Contentious Debt Limit Increases Once
the Norm? ................................................................................................................................... 12
Point of Clarification 4: Could a Platinum Coin Avoid a Binding Debt Limit? ............................ 14
Point of Clarification 5: The Public Debt Clause’s Effect on the Statutory Debt Limit ............... 16
Why Does the Fourteenth Amendment Have a Public Debt Clause? ..................................... 17
The Public Debt Clause: Judicial Interpretation and Open Questions .................................... 18
Perry v. United States ....................................................................................................... 18
Questions Concerning the Public Debt Clause ................................................................. 22
Concluding Question: Is the Debt Limit Obsolete?....................................................................... 24
Contacts
Author Information........................................................................................................................ 24
Congressional Research Service
Clearing the Air on the Debt Limit
s Congress considers how to reconcile rising federal debt levels and the debt limit,
discussions about the role of the debt limit among Members of Congress, researchers,
and the media promise to become more frequent.1 During debt limit episodes in the last
decade, misleading or less than fully accurate claims have, at times, surfaced. This report
provides clarifications on five common debt limit contentions.
A
The statutory debt limit, which has been modified 18 times since 2002, provides Congress a
means of controlling federal borrowing.2 The limit was reset at just over $28.4 trillion at the
beginning of August 2021, after a two-year suspension. The Bipartisan Budget Act of 2019 (BBA
2019; P.L. 116-37), enacted in August 2019, had suspended the debt limit through July 31, 2021.
The limit was then raised, as specified in the BBA 2019, to accommodate debt accumulated
during the suspension.3
The debt limit represents one way that Congress exerts control over fiscal policy, which stems
from closely related constitutional provisions. Those provisions—the Taxing and Spending
Clause (“Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and
provide for the common Defence and general Welfare of the United States”)4 and the Borrowing
Clause (“Power ... To borrow Money on the Credit of the United States”)5—establish the basis of
the congressional power of the purse.6 Congress, under its Borrowing Clause powers, has
authorized the Department of the Treasury to borrow through various debt instruments to finance
expenditures not covered by federal receipts.7 The total amount of outstanding federal debt, with
minor exceptions, is constrained by a statutory debt limit.8
When that limit is close to binding, the Treasury Secretary can invoke authorities to employ
extraordinary measures to finance federal expenditures.9 If expenditures persistently outrun
receipts, and if the debt limit is not modified, at some point Treasury’s cash balances and
borrowing capacity would be exhausted, leaving the Treasury without means to meet federal
obligations.10
1 Kenneth Thomas, a retired CRS legislative attorney, contributed to a previous version of this report.
2 With the use of suspensions and the extension of temporary debt limits, reasonable people might disagree on the
number of modifications of the limit.
3 P.L. 116-37 § 301(b).
4 U.S. CONST. art. I, § 8, cl. 1
5 U.S. CONST. art. I, § 8, cl. 2.
6
Congress also authorizes governmental entities to draw money from the U.S. Treasury to meet various financial
obligations. See U.S. CONST. art. I, § 9, cl. 7 (“No Money shall be drawn from the Treasury, but in Consequence of
Appropriations made by Law”).
7 These instruments include bonds (31 U.S.C. § 3102); notes (Id. § 3103); certificates of indebtedness and Treasury
bills (Id. § 3104); as well as savings bonds and savings certificates (Id. § 3105).
8 Those categories of federal debt are constrained in other ways. For instance, debts of the Federal Financing Bank
(FFB) are subject to a separate $15 billion limit (P.L. 93-224 § 9).
9 5 U.S.C. § 8348(j) et seq. Also see CRS Insight IN10837, “Extraordinary Measures” and the Debt Limit, by Grant A.
Driessen and Anthony A. Cilluffo.
10 Neil H. Buchanan and Michael C. Dorf, How to Choose the Least Unconstitutional Option: Lessons for the President
(and Others) from the Debt Ceiling Standoff, 112 COLUM. L. REV. 1175 (2011).
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Point of Clarification 1: The United States Had Debt
Limits Before 1917
Federal debt has been subject to limits since the beginning of the U.S. government. Before 1917,
Congress typically specified the interest rates, maturities, call options, and other aspects of debt
issuances.11 During wars, however, the U.S. Treasury was often granted more leeway in deciding
terms offered to investors.12 At times, Congress designated loan proceeds for specific purposes
such as rolling over existing federal debt, helping construct an intercontinental railroad in the
1860s, or financing the Panama Canal after the turn of the 20th century. At other times, Congress
authorized issuance of bonds simply to “meet the current expenses of the Government.”13
Enactment of the Second Liberty Bond Act of 1917 ( P.L. 65-43, 40 Stat. 288) on September 24,
1917, marked a turning point in federal debt policy, but maintained substantial constraints on
Treasury debt operations. The act imposed the first aggregate limit on federal borrowing, but
retained individual limits on separate bond issues as well.14
During the 1920s and 1930s, Congress allowed the U.S. Treasury more leeway to manage federal
debt in order to roll over World War I-era debt.15 That helped the Treasury develop more modern
means of public finance, such as using auctions to set interest rates.16 In July 1939, Congress set
an aggregate limit (P.L. 76-201) on federal debt, while allowing Treasury officials to decide how
to manage that debt.17 Thus, the modern debt limit—meaning an overall limit on federal debt
without sublimits—was established in 1939.18 That policy decision, like the passage of the
Second Liberty Bond Act, marked one point in the evolution of how Congress controls debt
policy, rather than a new assertion of authority.19
11 For a list of pre-World War I debt issuances, see U.S. Congress, National Monetary Commission, Laws of the United
States Concerning Money, Banking, and Loans, 1778-1909, 61st Cong., 2nd sess., 1910, S.Doc. 580, pp. 766-769;
https://fraser.stlouisfed.org/scribd/?item_id=21954&filepath=/files/docs/historical/nmc/nmc_580_1910-pt1.pdf.
12 For details, see CRS Report RL31967, The Debt Limit: History and Recent Increases, by D. Andrew Austin.
13 Act of March 2, 1839, 5 Stat. 323.
14 See Kenneth G. Garbade, Birth of a Market, (Cambridge, Mass.: MIT, 2012), ch. 5.
15 A debt is rolled over by issuing new debt to retire old debt.
16 Garbade (2012).
17 “President Urges Ending of Limit on Bonded Debt; Asks Congress to Facilitate Borrowing by Eliminating
$30,000,000,000, ‘Ceiling’ Stands By Total Debt Top $45 Billion All Right for Now, Message Says—Yielding to
Economizers is Seen,” New York Times, March 21, 1939. While a separate $4 billion limit for “National Defense”
series securities was introduced in 1940, in the next year federal debt was consolidated under an increased aggregate
limit of $65 billion.
18 Revenue Act of November 23, 1921 (42 Stat. 227; P.L. 67-98). See also Paul Studenski and Herman E. Kroos,
Financial History of the United States, 2nd ed. (New York: McGraw-Hill, 1963), p. 316.
19 In particular, the Second Liberty Bond Act provided a broad authorization for how bond proceeds could be used:
“Secretary of the Treasury, with the approval of the President, is hereby authorized to borrow, from time to time, on the
credit of the United States…to meet expenditures authorized for the national security and defense and other public
purposes authorized by law.” Emphasis added.
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Point of Clarification 2: Did the Federal
Government Default in the 1970s?
Some contend the federal government suffered technical defaults in the late 1970s. An
examination of the historical record suggests otherwise. While the meanings of the terms
“default” and “technical default” are clear in private contracts, they are less clear when applied to
the federal government. Private-sector contracts normally spell out “events of default,” such as
failure to pay on time as well as other lapses. Technical defaults typically refer to violations of a
legal agreement—such as a loan or securities contract—not involving failure to pay.20 Instead of
relying on bond contracts or similar legal instruments, Treasury offering circulars govern the
issuance of Treasury securities. Circulars are federal documents that can govern agency
operations and procedures. The Treasury offering circulars used in the 1970s do not address
failure to pay or other types of default events.21 Nor does the Uniform Offering Circular, which
has governed issuances of Treasury securities since 1993, reference those terms.22
Moreover, a breach of the debt limit—that is, a situation in which total federal debt subject to the
limit exceeded that limit—does not necessarily imply delayed or missed payments or other
failures to uphold the federal obligations. In three episodes in the late 1970s, lapses in a
temporary debt limit increase left the amount of outstanding federal debt above its limit. Those
lapses resulted in no payment delays, and thus were not defaults in the ordinary sense of that
term. That said, Treasury officials and others viewed those lapses as close calls that raised
substantial risks to the U.S. government’s financial credibility and its ability to respond to
disasters and emergencies.23
Lapse of Temporary Debt Limit Increase in October 1977
From 1954 until 1983, Congress addressed the debt limit through a series of temporary increases
and infrequent permanent increases. Reliance on temporary debt limit increases implied that if
Congress did not act before the temporary increase expired, the federal debt would be hundreds of
billions of dollars above its statutory limit. In 1971, the permanent debt limit was raised to $400
billion—$100 billion over its level at the end of World War II.24 The permanent limit was not
raised again until December 1980. In the meantime, a series of temporary debt limit increases
were enacted.
On June 30, 1977, the limit was temporarily increased to $700 billion until September 30, 1977
(P.L. 94-334). Congress did not act until after the expiration of that temporary debt limit increase,
which left total federal debt about $300 billion above its statutory limit for two business days.
“Lexicon: Definition of Technical Default,” Financial Times, n.d., at http://lexicon.ft.com/Term?term=technicaldefault.
21 Federal Reserve Bank of New York, Circular 7675: Auction of Notes and Bonds, July 25, 1975,
https://fraser.stlouisfed.org/title/466/item/476564.
22 U.S. Treasury, Uniform Offering Circular, Fiscal Service Series No. 1-93, https://www.treasurydirect.gov/instit/
statreg/auctreg/CFR-2014-title31-vol2-part356.pdf. The Uniform Offering Circular was published as a final rule on
January 5, 1993 (58 Federal Register 411).
23 Thomas E. Mann and Norman J. Ornstein, It’s Even Worse than it Looks (New York: Basic Books, 2012), p. 6. Also
see discussion of 1979 extension of Treasury loan authority below.
24 See Office of Management and Budget, FY2022 Budget of the U.S. Government, Historical Table 7.3,
https://www.whitehouse.gov/wp-content/uploads/2021/05/hist07z3_fy22.xlsx.
20
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Clearing the Air on the Debt Limit
Several factors contributed to this outcome, including rising polarization on debt issues in the
House25 and a two-week filibuster aimed at postponing action on measures to deregulate or
loosen a federal price cap on interstate transportation of natural gas.26 Action on the debt limit
was delayed when the House voted down an initial debt limit measure on September 19, 1977, on
a 180-201 vote.27 On September 28, 1977, two days before the temporary debt limit increase was
to lapse, the House passed a second measure (H.R. 9290, 95th Congress) on a 213-202 vote “after
some arms were twisted.”28
Meanwhile, a filibuster of a natural gas measure had tied the Senate in knots since mid-September
1977.29 The Carter Administration, as part of its National Energy Plan, had proposed capping
prices of “new” natural gas.30 On September 16, 1977, the Senate took up a bill (S. 2104, 95th
Congress) to raise and extend certain price limits on interstate gas sales. A motion to table a
substitute amendment (Bentsen-Pearson) proposing to eliminate price caps on “new” natural gas
markets was voted down, signaling the strength of Senate support for deregulation. Senator
Metzenbaum and Senator Abourezk then submitted hundreds of amendments.31 After a cloture
motion was agreed to on September 23, 1977, they called up amendments and took other actions
to delay action on deregulation of natural gas prices.32 In particular, on Friday, September 30,
1977, Senator Abourezk stated that he would object to a unanimous consent agreement to call up
the debt limit measure.33
25 “Since 1973, the House minority party has systematically withdrawn support for debt limit increases.” Frances E.
Lee, “Presidents and Party Teams: The Politics of Debt Limits and Executive Oversight, 2001-2013,” Presidential
Studies Quarterly, vol. 43, no. 4, December 2013, p. 782.
26 Sen. Robert Byrd, Senate majority leader at the time, later described it as “the roughest filibuster I have experienced
during my fifty-plus years in the Senate.” Sen. Robert Byrd, “The Filibuster and its Consequences,” The Hill, May 19,
2010, https://thehill.com/blogs/congress-blog/lawmaker-news/98681-the-filibuster-and-its-consequences-sen-robertbyrd.
27 After that vote, Speaker Tip O’Neill noted it was the “fourth consecutive year that the first time around this
legislation has been defeated.” Congressional Record, September 19, 1977, p. 29857.
28 Remarks of Rep. Delbert Latta, Congressional Record, October 4, 1977, p. 32104.
29 See discussion of 1977 filibuster in CRS Report R44395, Amending Senate Rules at the Start of a New Congress,
1953-1975: An Analysis with an Afterword to 2015, by Walter J. Oleszek. For a detailed analysis, see archived CRS
Report, Complexities of the Legislative Process: A Case Study of Congressional Consideration of National Energy
Legislation During the 95th Congress, 79-68 GOV, by Stanley Bach.
30 See archived CRS Issue Brief IB81020, Natural Gas Policy Act, by Lawrence Kumins, available to congressional
clients upon request.
31 See discussion of 1977 filibuster in CRS Report R44395, Amending Senate Rules at the Start of a New Congress,
1953-1975: An Analysis with an Afterword to 2015, by Walter J. Oleszek. At the start of the 96th Congress in 1979, the
Senate agreed to modify Rule XXII concerning cloture, limiting the total time for consideration of a matter once cloture
has been invoked. In particular, some actions taken in the 1977 filibuster were not available after those changes. See
Bach (op. cit.) and U.S. Congress, Senate Committee on Rules and Administration, Senate Cloture Rule: Limitation of
Debate in the Senate of the United States, committee print, prepared by Congressional Research Service, 112th Cong.,
1st sess., December 5, 2011, S.Prt. 112-31, pp. 33-34.
32 See Sen. James Abourezk, “Natural Gas and the Filibuster,” New York Times, October 9, 1977,
https://www.nytimes.com/1977/10/09/archives/natural-gas-and-the-filibuster.html.
33 Congressional Record, September 30, 1977, p. 31788.
Mr. ROBERT C. BYRD. Senators know as well as I that it has been impossible to anticipate what
might occur. Anything can happen fast in this situation, and sometimes it takes many days for it to
happen. But I would anticipate rollcall votes tomorrow, and I hope the Senate would find a way to
reach its final decision tomorrow. But I have been hoping that for several days.
Mr. ABOUREZK. Mr. President, to save the time of Senators, and I know everybody would like to
recess and go eat dinner-until tomorrow, I assume-I just want to tell the leader that I would object
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That evening, however, the Senate did take a late night break to act on a House-passed measure to
raise the debt limit by $72 billion for one year.34 Senator Harry Byrd, Jr., proposed an amendment
providing for a six-month increase of $52 billion instead, to which the Senate agreed.35 After a
short discussion, the Senate passed the bill as amended, 58-30. The next day, during a Saturday
session, the Senate, without debate and by voice vote, insisted on its amendment to the House
debt limit measure and requested a conference.
On Tuesday, October 4, 1977, the House agreed to the Senate amendment to the original House
measure (H.R. 9290, 95th Congress). The floor manager, Representative Bernice Sisk, conveyed
the recommendation of Ways & Means Chairman Al Ullman to adopt the Senate amendment,
rather than going to a conference committee, given that it was “imperative” to restore normal
operations at the U.S. Treasury. Sisk lamented that this was necessary “due to the circumstances
under which the other body has conducted its proceedings for the past two weeks.” President
Carter then signed the bill into law (P.L. 95-120) on the same day.36
Treasury Operations During the 1977 Debt Limit Lapse
The lapse in the temporary debt limit resulted in a level of federal debt that for two business days
stood $300 billion above the statutory limit of $400 billion. During those days, Treasury could not
borrow, though it had about $19 billion in cash reserves that sufficed to meet federal obligations
for a few days.37 The lapse disrupted Treasury’s operations by forcing suspensions of Treasury
auctions and savings bond sales scheduled for the first few days of October 1977.38
The lapse also prompted an emergency loan from the Federal Reserve. A World War II era
exception to the ban on direct purchases of Treasury securities by Federal Reserve banks
permitted loans up to $5 billion.39 On September 30, 1977, the Federal Reserve’s Federal Open
Market Committee voted unanimously to purchase a $2.5 billion certificate of indebtedness from
the Treasury, thus providing an equivalent amount of cash to Treasury. The certificate was retired
on October 4, 1977, when the debt limit was again raised.40
to bringing up any of those bills, and I would object to routine morning business being conducted.
Mr. LEAHY. Object to what?
Mr. ABOUREZK. Object to routine morning business being conducted.
Mr. ROBERT C. BYRD. Perhaps this could be satisfactory to the Senator. We could get
unanimous consent to take up the debt limit extension this evening and vote on it the first thing
tomorrow.
Mr. ABOUREZK. I would object.
34 Sen. Abourezk gave no explanation of why he raised no objection to consideration of the debt limit measure. For a
description of Senate and White House discussions, see George Lardner Jr. and Spencer Rich, “Bitterness and
Resentment,” Washington Post, October 5, 1977, https://www.washingtonpost.com/archive/politics/1977/10/05/
bitterness-and-resentment/8c1b4fa5-f514-4682-9edc-a6fc84f6bdc6/.
35 Congressional Record, September 30, 1977, pp. 31789-31790.
36 Remarks of Rep. Bernice F. Sisk, Congressional Record, October 4, 1977, p. 32104.
37 Remark of House Ways & Means Chairman Al Ullman, Congressional Record, October 4, 1977, p. 32105.
38 Wall Street Journal, “Expired Debt Ceiling Sparks Juggling Act By U.S. Treasury,” October 3, 1977, p. 31. Also see
U.S. Treasury, press release B-472, October 1, 1977, https://fraser.stlouisfed.org/title/press-releases-united-statesdepartment-treasury-6111/volume-208-587051 (p. 652 of pdf).
39 Kenneth D. Garbade, Direct Purchases of U.S. Treasury Securities by Federal Reserve Banks, Federal Reserve Bank
of New York Staff Report no. 684, August 2014, https://www.newyorkfed.org/medialibrary/media/research/
staff_reports/sr684.pdf.
40 Federal Reserve System, Federal Open Market Committee, Record of Policy Actions: October 17-18 Meetings,
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No federal payments were missed or delayed because Treasury’s cash balances were high enough
to cover federal financial obligations for the two days during which it was unable to borrow.
Treasury officials responsible for issuing that debt had acted within their statutory authorities. No
contractual obligations were breached. Furthermore, no credit rating agency then altered its
assessment of federal debt. Given that a technical default is normally defined as “violation of a
financial covenant in a loan agreement”41 and that Treasury securities were not and are not
governed by such financial covenants, how the October 1977 incident could be classified as a
technical default—as some have asserted—is unclear.42
Financial markets did not appear to react strongly to the violation of the debt limit.43 Newspaper
coverage of the debt limit landed in the back of business sections, rather than on front pages.44
Given that both the House and Senate had approved measures to increase the debt limit, it may
have seemed clear that the lapse would be short. Treasury Secretary Michael Blumenthal, in an
October 3, 1977, Cabinet meeting, outlined “Treasury’s plans to borrow money in the absence of
Congressional action on legislation to raise the debt limit,” but noted no financial market
disruptions according to minutes of that meeting.45
Incidents in 1978 and 1979
Another temporary debt limit increase expired on Tuesday, July 31, 1978, leaving federal debt
above its statutory limit. While the House had passed a debt limit increase on July 19, 1978,46 the
Senate did not approve that measure until Thursday, August 2, 1978. President Carter signed it
into law the following day (P.L. 95-333).47 That lapse left the U.S. Treasury unable to issue
securities to borrow funds during three business days.
The August 1978 act raised the temporary part of the debt limit to $398 billion through Saturday,
March 31, 1979. On March 27, 1979, the Senate passed on a 62-33 vote a bill (H.R. 2534, 96th
Congress) to increase the debt limit temporarily. That bill included an amendment to require the
President to submit a plan for a balanced budget in addition to the ordinary budget submission.
The House did not take up and approve the Senate measure until Monday, April 2, 1979.48
President Carter signed the bill the same day (H.R. 2534, P.L. 96-5).49
November 17, 1977, pp. 33-34, https://www.federalreserve.gov/monetarypolicy/files/fomcropa19771018.pdf.
41 Corporate Finance Institute, “What is a Technical Default?” webpage, https://corporatefinanceinstitute.com/
resources/knowledge/credit/technical-default/.
42 Thomas E. Mann and Norman J. Ornstein, It’s Even Worse than it Looks (New York: Basic Books, 2012), p. 6.
43 For instance, the 3-month Treasury bill rate rose 6 basis points on September 30, 1977, and another 6 basis points the
following Monday. Short-term Treasury rates remained steady for the rest of the year. See Federal Reserve Bank of St.
Louis, FRED website, https://fred.stlouisfed.org/graph/?g=Glfh. 100 basis points equals 1 percentage point.
44 For instance, see Washington Post, “Debt Limit Up, Savings Bond Sales Resumed,” October 6, 1977, p. 77; and New
York Times, “U.S. Debt Ceiling Rise is Approved by House,” October 5, 1977, p. D7.
45 Executive Office of the President, “Minutes of the Cabinet Meeting,” October 3, 1977, p. 4 (p. 80 of pdf),
https://www.jimmycarterlibrary.gov/digital_library/sso/148878/45/SSO_148878_045_01.pdf.
46 The House passed H.R. 13385 on a 205-202 vote.
47 Senate leadership had tentatively planned to take up the debt limit measure on August 1, 1978, but did not do so.
Remarks of Senate Majority Leader Robert Byrd, Congressional Record, p. 23442, July 31, 1978. The Senate approved
H.R. 13385 on a 62-31 vote.
48 Rep. Richard Bolling stated that “I think we should have acted on this last week. But we did a check, and we found
that we would be badly defeated last week. It was the better part of wisdom to postpone it, even though we knew there
would be a crisis.” Congressional Record, April 2, 1979, p. 6892.
49 The House passed H.Res. 183 (96th Congress), a rule to agree to Senate amendments, on a 209-165 vote.
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Due to those delays, the debt limit therefore again reverted to its permanent level of $400 billion.
Prior to the House taking action, Treasury officials had briefed some Members that Social
Security and other checks set to be mailed April 3, 1979, might not clear and that $3.3 billion in
maturing Treasury bills could not be redeemed without an increase in the debt limit, which would
allow a resumption of the Treasury’s capacity to issue debt.50 Media reports noted that the U.S.
Treasury had called in tax receipts held in commercial banks, arranged for a Federal Reserve
loan, and made plans to suspend interest payments to Social Security and Civil Service trust
funds.51
In a September 1979 report, the General Accounting Office (GAO; now the Government
Accountability Office) detailed disruptions in Treasury operations and summarized costs due to
forgone interest income, cancelled securities sales, and disruptions of government programs. The
report also criticized the use of temporary debt limit increases.52 The Comptroller General warned
that:
The Government has never defaulted on any of its securities because cash has been
available to redeem them upon maturity or demand. It is unlikely that the Congress would
intentionally delay action on public debt legislation long enough for a default to result.
Nonetheless, the possibility exists.53
Payment Delays in Spring 1979
Less than four weeks after the temporary increase in the debt limit (P.L. 96-5) was enacted on
April 2, 1979, problems in computerizing some Treasury debt operations delayed interest and
principal payments to some small investors holding Treasury securities.54 Some contended this
constituted a “mini-default.” A closer examination of those events and market reactions suggests
a different conclusion. In particular, market movements in interest rates on critical dates seem to
track anticipated changes in the Federal Reserve’s monetary stance.
In late April and early May 1979, about 4,000 Treasury checks for interest payments and security
redemptions were delayed due to back-office technical and organizational problems, in part
related to a reorganization of Treasury debt operations.55 Delays affected payments estimated at
$122 million, with foregone interest totaling an estimated $125,000.56 Those amounts represented
a small share of the market in Treasury securities; for instance, a few days before those delays,
50 Remarks of Speaker Tip O’Neill, Congressional Record, April 2, 1979, p. 6891.
51 John H. Allan, “Delay on U.S. Debt Ceiling Hurts Treasury and Financial Markets,” New York Times, March 31,
1979, p. 1.
52 GAO, A New Approach to the Public Debt Legislation Should Be Considered, FGMSD-79-58, September 7, 1979,
https://www.gao.gov/products/fgmsd-79-58.
53 Testimony of Elmer Staats, Comptroller General, in U.S. Congress, House Committee on Ways and Means, Increase
in Public Debt Ceiling, hearing, 96th Cong., 1st sess., September 11, 1979.
54 Terry L. Zivney and Richard D. Marcus, “The Day the United States Defaulted on Treasury Bills,” Financial
Review, vol. 24 (1989), issue 3, pp. 475-489. Also see Edward D. Kleinbard, “The Debt-Ceiling Crisis Is Real,” New
York Times, August 7, 2017, https://www.nytimes.com/2017/08/07/opinion/debt-ceiling-congress-default-real.html.
More recently, see Mark Zandi and Bernard Yaros, “Playing a Dangerous Game With the Debt Limit,” working paper,
September 21, 2021, https://www.moodysanalytics.com/-/media/article/2021/playing-a-dangerous-game-with-the-debtlimit.pdf.
55 For details, see CRS Report R44704, Has the U.S. Government Ever “Defaulted”?, by D. Andrew Austin.
56 Zivney and Marcus, op. cit.
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the U.S. Treasury rolled over $6 billion in debt.57 The federal government may have reached a
settlement with affected investors.58
Those payment delays were also blamed for increasing federal borrowing costs.59 Market interest
rate movements on the date of the first payment delay—April 26, 1979—were more plausibly
affected by release of higher than expected inflation estimates60 and the anticipation of Federal
Reserve responses to significant increases in money supply measures.61 At that time, the Federal
Reserve’s monetary policy responses targeted two money supply measures.62 As anticipated in the
financial press, the Federal Open Markets Committee in its April 27, 1979, conference call
decided to increase the federal funds rate.63 As such, payment delays that were not reported until a
week and a half later seem a less likely explanation.64
Responses to Debt Limit Lapses in the 1970s
The 1977, 1978, and 1979 incidents prompted some House Members to explore ways to integrate
consideration of debt limit measures with legislative action on budget resolutions. Although
financial market reactions to those incidents appear to have been muted, many Members were
nonetheless concerned about risks to federal credit and the financial system. The efforts of those
House Members culminated in a change in the House rules, commonly called the Gephardt Rule,
after Representative Richard Gephardt, who helped craft it.65 The rule linked House agreement on
a budget resolution to automatic enrollment of a bill to increase the debt limit to a level
considered “appropriate” in that budget resolution.66
Other Members sought to curtail the Treasury’s authority to borrow from the Federal Reserve,
which had been used briefly during the 1977 and 1979 lapses, as a means of tightening the
57 “Treasury Bill Auction to Reduce U.S. Debt by About $200 Million,” Wall Street Journal, April 5, 1979.
58 A class action suit was dismissed with prejudice on May 12, 1980, which barred refiling of the claim. The resolution
of the suit is unclear because case records were destroyed on November 28, 2011.
59 Kleinbard, op. cit. and Zivney and Marcus, op. cit.
60 John H. Allen, “Price of Bonds Decline Sharply,” New York Times, p. D9, April 27, 1979. One trader was quoted to
say “the Consumer Price Index Number set the tone.”
61 “Big Boost in Money Supply May Put Fed Under Heavy Pressure to Tighten Credit,” Wall Street Journal, April 27,
1979, p. 32. The Federal Reserve regularly releases estimates of the money supply. At the time, the Federal Reserve
was evolving towards a monetary policy focused on money supply measures M1 (cash and checking accounts) and M2
(M1 plus certain short-term deposits). See Chan Huh, “Interest Rate Smooth and Inflation, Then and Now,” Federal
Reserve Bank of San Francisco Weekly Letter, no. 95-34, October 13, 1995, http://www.frbsf.org/economic-research/
files/el1995-34.pdf.
62 Federal Reserve, “Record of Policy Actions of the Federal Open Market Committee,” Federal Reserve Bulletin, May
1979, https://fraser.stlouisfed.org/title/federal-reserve-bulletin-62/may-1979-20453/record-policy-actions-federal-openmarket-committee-74471.
63 Federal Reserve Chairman G. William Miller summarized the discussion saying, “I hope that will be agreeable to
everyone because this is a close one to call. I think everyone had a persuasive argument on both sides [but] the
differences in terms of what really will be done are fairly narrow. And that being so, my tendency would be to follow
the directive as we’ve written it, which the [Open Markets] Desk would interpret as meaning they should be moving
[the funds rate] up to 10-1/4 percent.” Federal Reserve, Federal Open Markets Committee, April 27, 1979, conference
call transcript, https://www.federalreserve.gov/monetarypolicy/files/FOMC19790427confcall.pdf.
64 Edward P. Foldessy, “Treasury Hits Delays in Mailing Checks to the Holders of its Maturing Securities,” Wall Street
Journal, May 6, 1979, p. 8.
65 Rep. Richard “Dick” Gephardt served in the House from 1977 through 2005.
66 See CRS Report RL31913, Debt Limit Legislation: The House “Gephardt Rule”, by Bill Heniff Jr.
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congressional power of the purse.67 While Congress in 1979 extended that authority for two
years, it was not used again after the April 1979 temporary debt limit lapse described above.
Muted Reactions in Financial Markets
The muted financial market responses to lapses of temporary debt limit increases may reflect
three factors. First, in the 1977, 1978, and 1979 incidents, both chambers of Congress had
approved a debt limit measure and a rapid reconciliation of differences between the chamber
versions seemed imminent.
Second, financial markets were simpler. Wall Street investment banks were typically structured as
partnerships, rather than public companies, and therefore had less capacity and incentive to take
on significant risks. Wall Street brokerage fees had only recently been deregulated, and London
financial markets—a center for Eurodollar transactions—would not see major deregulation until
1984. Moreover, derivatives markets, while rapidly growing in the 1970s, were still an infant
industry.68 By contrast, the prospect of a debt limit impasse in 2011 generated serious concerns
given the prevalence of high-leverage levels and the scale of the shadow banking system that has
relied to a large extent on Treasury securities.69
Third, as discussed below, the Federal Reserve then had authority to lend the U.S. Treasury up to
$5 billion on short notice, which may have provided financial markets with a measure of
reassurance.70
Nonetheless, the three debt limit lapses and the resulting proximate risk of default raised
concerns. Treasury Secretary Miller testified that
I know that this committee has made every effort in the past to assure timely action by
Congress on the debt limit. Yes, the record of the past two years has not been good. During
this period debt limit legislation was considered by Congress four times. On three
occasions action was not taken before the expiration date, and the Treasury was unable to
borrow until the Congress acted two or three days later. Significant costs were incurred by
the Treasury, and extraordinary measures were required to prevent the Government from
going into default.71
67 George Selgin, “Ron Paul and Our Big, Fat Fed,” Cato Institute weblog, March 15, 2021, https://www.cato.org/blog/
ron-paul-our-big-fat-fed.
68 Average daily repo (repurchase agreement) volumes were just under $8 billion in 1977, compared to over $4 trillion
in 2020. See Kenneth D. Garbade, “The Evolution of Repo Contracting Conventions in the 1980s,” Federal Reserve
Bank of New York Economic Policy Review, vol. 12, no. 1 (May 2006), https://www.newyorkfed.org/research/epr/
06v12n1/0605garb.html. Also see Securities Industry and Financial Markets Association (SIFMA), “US Repo Market
Fact Sheet,” webpage, January 19, 2021, https://www.sifma.org/resources/research/us-repo-market-fact-sheet/.
69 Financial Services Forum, letter to the U.S. President and Members of Congress, July 28, 2011,
https://web.archive.org/web/20120514130716/http://www.financialservicesforum.org/attachments/
365_20110728_fsf_letter_to_obama_and_congress.pdf. The letter was signed by the heads of 14 major financial
institutions. Also see Eric Dash and Nelson D. Schwartz, “A Mobilization in Washington by Wall Street,” New York
Times, July 30, 2011, https://www.nytimes.com/2011/07/31/business/wall-street-mobilizes-to-raise-debt-ceiling.html.
70 Kenneth D. Garbade, Direct Purchases of U.S. Treasury Securities by Federal Reserve Banks, Federal Reserve Bank
of New York, Staff Report no. 684, August 2014, https://www.newyorkfed.org/medialibrary/media/research/
staff_reports/sr684.pdf.
71 Testimony of Treasury Secretary G. William Miller, in U.S. Congress, Senate Committee on Finance, Subcommittee
on Taxation and Debt Management, hearing, Expiring $830 Billion Public Debt Limit, September 11, 1979, 116th
Cong., 1st sess., https://archive.org/details/SecTreasAnnReport1979/page/n335/mode/2up.
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Congressional Responses to the Lapses
The episodes in the late 1970s in which federal debt exceeded its limit for a few days spurred
conflicting congressional responses. Some sought to strengthen Congress’s control over debt
policy by limiting Treasury’s ability to obtain emergency loans, which had been used in two of
those episodes. Others sought to avoid impasses that led to those lapses by integrating debt limit
decisions into a broader budgetary process. Those trends may parallel observations of some
political scientists that Congress became a more polarized institution over the course of the
1970s.72
Congress Extends and Limits Fed Authority to Lend to Treasury in 1979
The U.S. Treasury, as noted above, obtained emergency loans from the Federal Reserve in 1977
and 1979. In a 1979 hearing, a Federal Reserve governor and a Treasury official73 stressed the
utility of a lending facility available in an emergency.74 A measure (H.R. 3404, 96th Congress) to
extend that authority for five years, however, was voted down in the House.75 Opponents objected
to the increase in the loan limit from $5 billion to $15 billion and argued the loan authority
weakened congressional control of fiscal policy.76 Supporters cited the need to respond to major
emergencies.77 Two weeks later the House passed an amended version that extended the authority
72 Frances E. Lee, “Presidents and Party Teams: The Politics of Debt Limits and Executive Oversight, 2001-2013,”
Presidential Studies Quarterly, vol. 43, no. 4 (December 2013), pp. 775-791.
73 Testimony of J. Charles Partee and of Paul H. Taylor, Assistant Treasury Secretary, in U.S. Congress, House
Committee on Banking, Finance, and Urban Affairs, Subcommittee on Domestic Monetary Policy, hearing, Federal
Reserve-Treasury Draw, 96th Cong., 1st sess., March 5, 1979, Serial No. 96-4. Partee stated
Under any future conditions of national emergency occasioned by war or natural disaster, the
Treasury might again face unanticipated needs for immediate funds at a time when securities
markets are in general disarray. While the Congress probably would be in a position to reestablish
an emergency borrowing authority quickly in such circumstances, it seems far more efficient to
maintain the existing standby direct borrowing procedures in order to assure the Treasury the
capacity to finance for at least a limited period—without the necessity of such congressional action.
74 On March 28, 1979, the day after the Senate agreed to an amendment to a House-passed version of a debt limit
measure rather than approving the House-passed bill without changes, part of a nuclear reactor core melted down at the
Three Mile Island power plant near Harrisburg, PA. One House Member seemed to allude to the incident in the May 7,
1979, debate over extending loan authority discussed below.
75 H.R. 3404 was considered on May 7, 1979, under the suspension of the rules procedure, requiring a two-thirds
majority, but obtained less than a majority (175-195).
76 On May 7, 1979, Rep. Ron Paul contended
The last two times, as was stated, it was used to finance the debt more or less skirting around the
Congress, because we had not as of yet raised the debt limit. I do not think that it is wise to permit
this back door financing of the national debt. I believe that this authority can act as an off-budget
item. Theoretically, even though in the past I admit it has not been used this way, the Government
could borrow $15 billion, keep it for 6 months, pay it off 1 day and review it the next. This would
be $15 billion out of the budgetary controls of the Congress.
Congressional Record, May 7, 1979, p. 10082.
77 On May 7, 1979, Rep. Parren J. Mitchell seemed to allude to the Three Mile Island meltdown:
When the authority was first established we thought of what would be necessary to cover a real
catastrophic emergency in this country. If it was $5 billion way back then, when you consider the
cost of inflation, it has now to be at least triple that. By way of illustration, God forbid we should
ever have a series of nuclear accidents in this country, let us hope that would never happen, but in
the event it does, we do not know what it would cost to deal with that emergency.
Congressional Record, May 7, 1979, p. 10082.
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for two, rather than five, years and retained a $5 billion limit.78 The amended version also
subjected any loan to Treasury to the overall debt ceiling, thus limiting its usefulness to Treasury
in avoiding a binding debt limit.79 Uses of the loan authority during debt limit episodes were a
central concern during the debate.80 The enacted measure (P.L. 96-18) extended the loan authority
until May 1981, when it lapsed.81 The loan authority was not used after the 1979 renewal.82
House Explores Tying Debt Limit to Congressional Budget Process: the
“Gephardt Rule”
In the winter following the 1977 debt limit lapse, the House Ways & Means Committee reported a
measure to increase the debt limit (H.R. 11180, 95th Congress) that included a provision to set the
debt limit at the level established in the concurrent budget resolution.83 That provision, however,
raised constitutional concerns because the President plays no role in concurrent resolutions.84 The
full House considered the bill on March 7, 1978, and agreed to an amendment stripping the
provision to link the debt limit to the budget resolution. The bill subsequently failed on final
passage, 165-248, as some Members no longer supported the measure without this language.
In April and May 1978, a House Rules subcommittee held three hearings to consider how to tie
the debt limit to revenue and spending decisions reflected in the budgetary framework as
expressed in the concurrent budget resolution. The subcommittee chair acknowledged that “the
concurrent budget resolution may not be an appropriate method to replace the present statutory
system of setting the debt limit” due to procedural and constitutional obstacles.85 Several legal
experts argued that only a law could modify the debt limit because it had been established in
law.86
78 Congressional Record, May 23, 1979, pp. 12512-12519.
79 Congressional Record, May 23, 1979, p. 12515.
80 Rep. Robert Bauman stated “This has been Treasury emergency authority since 1942, and has only been used
sparingly. But, it has been used, as I understand it, to finance getting around the public debt when the Treasury was up
against an expiration of the debt limit. That, in fact, skirts the Congress and allows the Treasury a leeway that I do not
think they ought to have.” Congressional Record, May 23, 1979, p. 12513.
81 The version of H.R. 3404 reported by the House Banking Committee proposed allowing the Fed to make emergency
loans of up to $15 billion to the U.S. Treasury in the form of Treasury securities, which could then be sold on the open
market to obtain cash. In the enacted version (P.L. 96-18), the Federal Reserve loans of securities would count in the
debt ceiling.
82 Garbade (2014), p. 21.
83 House Committee on Ways and Means, H.Rept. 95-923 (Part I), 1978. In addition to setting a new temporary debt
level for the coming year, H.R. 11180 “would tie the periodic change in the debt limit to the limit specified in the most
recently approved concurrent resolution on the budget.” Also see remarks of Al Ullman, Congressional Record,
February 28, 1978, p. 5034.
84 Summary offered by Rep. Joe Moakley, Congressional Record, March 7, 1978, pp. 5584-5586.
85 Remarks of Subcommittee Chairman Gillis Long, Subcommittee on the Rules and Organization of the House,
Hearings on Congressional Procedures, 95th Congress, 2nd sess., April 26, May 3, May 4, 1978, at p. 2,
https://books.google.com/books?id=b980DHTUXoQC&newbks=1&newbks_redir=0. Rep. Gillis Long also headed the
House Democratic Caucus at the time. Rep. Dick Gephardt succeeded him in that post.
86 For instance, Patricia Wald, then Assistant Attorney General and later Chief Judge of the U.S. Court of Appeals for
the District of Columbia Circuit, wrote that “[i]n our view, Art. I, § 7 of the Constitution requires any Congressional
action having the force of law to be submitted to the President for his approval or veto. Under this bill, Congress would,
in effect, assert the power to amend [31 U.S.C.] § 757b without Presidential participation by making the key
substantive provision of that section subject to determination by a concurrent resolution.” Ibid., pp. 72-73.
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An alternate approach put forth was to have a joint resolution incorporating the debt limit level
set in the concurrent budget resolution immediately follow agreement on that budget resolution.87
Some Members of the House noted that the Senate could attach nongermane amendments to such
a debt limit measure.88 Some Members were also concerned how new debt limit approaches
would interact with the congressional budget process, which was then only a few years old.
On September 26, 1979, the House took a more limited path as part of a measure (H.R. 5369; P.L.
96-78) to create another temporary increase in the debt limit.89 The act established Rule XLIX of
the Standing Rules of the House of Representatives, known as the “Gephardt rule,” which
instructed the House Clerk to send the Senate an engrossed joint resolution when the House
approved a budget resolution. Over time, that rule has been modified, repealed, and reinstated.90
Proponents of the rule have argued that as debt is the arithmetical result of spending and revenue
trajectories, debt limit policy should be linked to the congressional budgetary process that sets
levels of spending and revenues deemed appropriate.91 Opponents have argued that the rule
allows Members to avoid a difficult vote and thus undermines fiscal accountability.92
Point of Clarification 3: Were “Clean” or Less
Contentious Debt Limit Increases Once the Norm?
Some commentators have claimed that contentious debt limit episodes are a recent phenomenon
or that “clean” debt limit increases were once the norm.93 Debt policy, however, has been a
divisive issue since the beginning of American government and has often been linked with other
policy decisions.94 Debt, by its nature, allows government to shift the fiscal burden of current
87 Statement of Rep. Robert Giaimo, Subcommittee on the Rules and Organization of the House, Hearings on
Congressional Procedures, 95th Cong., 2nd sess., April 26, 1978, at pp. 3-5, https://books.google.com/books?id=
b980DHTUXoQC&newbks=1&newbks_redir=0.
88 Rep. Claude Pepper—also a former Senator—noted that “when anything is before the Senate, everything is before
the Senate.” Ibid., p. 9. Previously, Rep. Barber Conable stated “The so-called limit has done nothing to impede the
continual upward march of the national debt to unprecedented levels. When the limit begins to bind, the House simply
raises it. Then in the other body, where the word ‘germane’ is not part of the legislative vocabulary, costly spending
bills have frequently added to this veto-proof measure. Over the years, the debt limit bills have probably cost us far
more than they have ever saved.” Congressional Record, March 7, 1977, p. 5876.
89 The House passed the bill on a 219-198 vote.
90 For subsequent developments, see CRS Report RL31913, Debt Limit Legislation: The House “Gephardt Rule”, by
Bill Heniff Jr.
91 Rep. Gillis Long said “Everyone is aware that the committee bill also provides for a new procedure developed by the
gentleman from Missouri (Mr. GEPHARDT) whereby the debt ceiling in the future may be established through the
congressional budget process. Various versions of this procedure have been under discussion for a long time. Through
persistence, lengthy consultation, brainpower, and creative imagination, the gentleman has refined a procedure that I
hope we all can embrace.” Congressional Record, September 26, 1979, p. 26338.
92 Rep. John Ashbrook, opposed the measure, arguing that “we should not abolish separate consideration on the debt
limit. In the consideration of the debt limit bills, our attention is focused solely on the amount of debt this country has
accumulated. We need to do this from time to time. In budget resolutions, the debt limit figure tends to disappear in a
morass of other figures.” Congressional Record, September 26, 1979, p. 26339.
93 Simon Johnson, “The Debt Ceiling and Playing with Fire,” New York Times, January 24, 2013. “In the past, the
potential for confusion around binding debt-ceiling limits was well understood. The debt ceiling was therefore raised
without too much fuss, and the party in opposition would typically object in principle but not put up a real fight.”
94 Norman K. Risjord, “The Compromise of 1790: New Evidence on the Dinner Table Bargain,” William and Mary
Quarterly, vol. 33, no. 2 (1976), pp. 309-314, https://www.jstor.org/stable/1922168. Thomas Jefferson, before that
compromise on the assumption of state debts and the location of the national capitol was reached, wrote to George
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expenditures or lessen the burden of current taxes by transferring obligations to future
taxpayers.95 Shifting fiscal burdens into the future through debt management is a powerful and
potentially beneficial tool of fiscal policy, but can also become a means of avoiding fiscal
responsibility in the present. Debt policy discussions, therefore, often become contentious.
Since 1978, 27 of a total of 59 debt limit modifications were “clean”—meaning that a debt limit
measure was not linked to other provisions.96 That delineation, however, is imperfect. In some
cases, a debt limit provision might have been attached to another measure that acted as a
convenient legislative vehicle for passage. In other cases, combining a debt limit modification
with other provisions may have resulted from a broad fiscal compromise among policymakers. In
addition, a debt limit modification enacted as a standalone measure could have resulted from a
policy compromise involving other issues. For instance, on February 15, 2014, a “clean” debt
limit suspension (P.L. 113-83) was enacted. On the same afternoon, another measure (P.L. 11382) was enacted to reverse certain reductions in cost-of-living adjustments to working-age
military retiree pensions that had been included in the Bipartisan Budget Act of 2013 (BBA2013;
P.L. 113-67). Although nothing formally linked the two measures, their passage in quick
succession may have reflected a fiscal compromise.
Debt limit measures have been informally or formally linked with other issues for many
decades.97 In 1939, when Congress was considering creating what became the modern debt limit,
Senator George Norris offered an amendment to allow the Tennessee Valley Authority (TVA) to
use bonds to consummate purchases of some power plants. Once a separate TVA measure was
agreed to, the amendment to the debt limit measure (H.R. 5748, 76th Congress) was withdrawn.98
In 1957, Congress declined to raise the limit until the following February, in part to “compel more
economy of efficiency, better management of money and manpower in the defense program.”99
In the 1960s, debt limit debates provided a forum for those concerned about the expansion of
federal spending due to federal credit guarantees, new social insurance programs, and the
escalation of the Vietnam War.100 After a June 1960 debt limit increase (P.L. 86-564) that included
various tax provisions, however, unrelated matters were not attached to debt limit measures
during Senate floor consideration for the rest of the 1960s.101
Mason that “[i]n general I think it necessary to give as well as take in a government like ours.” (letter of June 13, 1790,
https://founders.archives.gov/documents/Jefferson/01-16-02-0295). Also see, L.-M. Miranda and Jeremy McCarter,
“The Room Where it Happens,” Hamilton: the Revolution, (New York: Hachette, 2016), pp. 186-190.
95 Or, alternatively, to future program beneficiaries affected by later spending reductions.
96 See CRS Report R41814, Votes on Measures to Adjust the Statutory Debt Limit, 1978 to Present, by Justin Murray.
97 Linda K. Kowalcky and Lance T. LeLoup, “Congress and the Politics of Statutory Debt Limitation,” Public
Administration Review, vol. 53, no. 1 (January-February 1993), pp. 14-27.
98 Senate debate, Congressional Record, vol. 84, part 6 (June 1, 1939), pp. 6480, 6497-6501; part 9 (July 14, 1939), pp.
9141, 9164.
99 Rep. George H. Mahon, “Battle of the Budget in Defense Program,” Extension of Remarks, Congressional Record,
vol. 103 (August 30, 1957), pp. H16805-H16809.
100 For example, a legislative history of temporary debt limit increases in 1967 runs 1,195 pages. See U.S. Congress,
House Committee on Ways and Means, Legislative History of H.R. 4578 to Provide a Temporary Increase in the
Public Debt Limit (P.L. 90-3) and H.R. 10867 to Increase the Public Debt Limit Set Forth in Sec. 21 of the Second
Liberty Bond Act, committee print, prepared by Staff of the Committee on Ways and Means, 90 th Cong., 1st sess., 1967,
H. 1046 (Washington: GPO, 1967).
101 Archived CRS memorandum DL751597, Non-Germane Amendments Attached to Debt Ceiling Bills, June 12, 1975,
by Paul S. Rundquist. Unified partisan control of both chambers of Congress from 1961 through 1969 and a budget
surplus in FY1960 may explain the absence of nongermane amendments to debt limit bills in that period. Unrelated
provisions might have been combined with debt limit measures through other means.
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In the early 1970s, debt limit measures were embroiled in debates over campaign finance reform
and in congressional conflicts with the Nixon and Ford Administrations.102 Senate amendments to
debt limit measures increased Social Security benefits in 1971, 1972, and 1973. In 1973,
proposed amendments to provide federal campaign financing, to cut off funding for bombing in
Cambodia, and to limit presidential impoundment of funds were all rejected.103
In the mid-1980s, a group of Senators attached a system of budget constraints and deficit targets,
which became known as the Gramm-Rudman-Hollings framework, to a debt limit provision after
“partisan and sometimes testy wrangling.”104
Debates over what provisions should accompany a debt limit increase in late 1995 and early 1996
also were contentious. In 1995, some Members called for spending reductions of about $245
billion over seven years as a condition for raising the debt limit.105 After a related lapse in
appropriations and a veto of one debt limit bill (H.R. 2586, 104th Congress),106 the debt limit was
raised on March 29, 1996.107 The debt limit episode of 1995-1996 was described by GAO as a
“crisis.”108
Point of Clarification 4: Could a Platinum Coin
Avoid a Binding Debt Limit?
Some commentators have pointed to a statutory provision109 that allows minting of platinum coins
as a purported solution to the prospect of a binding debt limit. Unlike other provisions governing
coinage, the face values of platinum coins are not limited. That provision, according to its author,
was introduced to give the U.S. Treasury flexibility in minting relatively low-denomination
platinum coins for collectors.110
102 Ibid. Debt limit bills were H.R. 4690 (1971), H.R. 15390 (1972), and H.R. 8410 (1973). Also see Congressional
Quarterly, Congress and the Nation, vol. IV, pp. 62-64, 68, 70.
103 Debt limit bills were H.R. 11104 and H.R. 8410.
104 Balanced Budget and Emergency Deficit Control Act of 1985 (P.L. 99-177). See Jonathan Fuerbringer, “Leaders in
Senate Reach Compromise on U.S. Debt Limit,” New York Times, October 10, 1985, https://www.nytimes.com/1985/
10/09/us/leaders-in-senate-reach-compromise-on-us-debt-limit.html. Also see Dick Kirschten and Jonathan Rauch,
“Political Poker Game Over Deficit Bill Calls Bluff of Reagan and Congress,” National Journal, December 14, 1985,
pp. 2857-2858. In addition, see Joseph White and Aaron Wildavsky, The Deficit and the Public Interest: The Search
for Responsible Budgeting in the 1980s, (Berkeley: Univ. of California Press, 1989), ch. 19,
https://publishing.cdlib.org/ucpressebooks/view?docId=ft5d5nb36w;brand=ucpress.
105 Kara Brandeisky, “How Clinton Handled His Debt Ceiling Crisis Better Than Obama,” New Republic, August 2,
2011, https://newrepublic.com/article/93043/obama-clinton-debt-ceiling-crisis. Also see Associated Press, “Armey
Says GOP Will Call All The Shots,” January 22, 1996, https://www.deseret.com/1996/1/22/19220603/armey-says-gopwill-call-all-the-shots.
106 Vetoed on November 13, 1995. A continuing resolution (H.J.Res. 115, 104th Congress) that included spending
reductions in Medicare and other programs was also vetoed on the same day.
107 P.L. 104-121 (H.R. 3136). Two earlier other acts modified the debt limit to allow Social Security payments (P.L.
104-103) and investments in certain federal trust funds (P.L. 104-115).
108 U.S. GAO, Debt Ceiling: Analysis of Actions During the 1995-1996 Crisis, GAO/AIMD-96-130,
http://www.gao.gov/archive/1996/ai96130.pdf.
109 31 U.S.C. § 5112(k).
110 Dylan Matthews, “Michael Castle: Unsuspecting Godfather of the $1 Trillion Coin Solution,” Washington Post,
January 4, 2013, https://www.washingtonpost.com/news/wonk/wp/2013/01/04/michael-castle-unsuspecting-godfatherof-the-1-trillion-coin-solution/.
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Instead, proponents of the platinum coin strategy have encouraged the U.S. Treasury to consider
minting a high-denomination coin, which—according to proponents—could be deposited at the
Federal Reserve and exchanged for cash for the U.S. Treasury’s general fund.111 Officials of both
the U.S. Treasury and the Federal Reserve System therefore would have to approve the strategy.
Both the U.S. Treasury and the Federal Reserve, however, rejected such options in 2013.112 A
Treasury spokesman stated that “Neither the Treasury Department nor the Federal Reserve
believes that the law can or should be used to facilitate the production of platinum coins for the
purpose of avoiding an increase in the debt limit.” The U.S. Treasury again rejected such
stratagems in 2015.113 In September 2021, Treasury Secretary Yellen, in response to a question
regarding platinum coin proposals, stated “I believe that the only way to handle the debt ceiling is
for Congress to raise it and show the world, the financial markets, and the public that we’re a
country that will pay your bills when we incur them.”114
Although some contend that the Treasury Secretary could cajole or compel the Federal Reserve to
accept a high-value platinum coin,115 no evidence exists that the current or any past Treasury
Secretary would entertain such a fiscal strategy or that the Federal Reserve would accede to such
demands.
Others have argued that using a high-value platinum coin to evade the debt limit, even if that
were feasible, would impair basic constitutional structures and undermine the legitimacy of
federal governance.116
Apart from various legal, accounting, and practical uncertainties,117 the platinum coin strategy
would present several major policy issues. First, such actions by executive branch officials could
be seen as undermining Congress’s fiscal powers. Second, both the U.S. Treasury and Federal
Reserve have sought for many decades to maintain a separation between fiscal and monetary
policy.118 Governments can finance their expenditures through revenues or borrowing or by
111 Joe Weisenthal, “The Former US Mint Director Behind The Controversial Law Explains Why A Platinum Coin
Could Avoid A Major Crisis,” Business Insider, January 8, 2013; http://www.businessinsider.com/mint-the-coinformer-mint-director-philip-diehl-explains-why-the-trillion-dollar-coin-law-would-work-2013-1. Also see Paul
Krugman, “Be Ready to Mint That Coin,” New York Times, January 7, 2013, https://krugman.blogs.nytimes.com/2013/
01/07/be-ready-to-mint-that-coin/.
112 Ezra Klein, “Treasury: We Won’t Mint a Platinum Coin to Sidestep the Debt Ceiling,” Washington Post, January
12, 2013; https://www.washingtonpost.com/news/wonk/wp/2013/01/12/treasury-we-wont-mint-a-platinum-coin-tosidestep-the-debt-ceiling/. Also see then Federal Reserve Chairman Ben Bernanke, Remarks at the University of
Michigan Ford School, January 14, 2013, http://fordschool.umich.edu/sites/default/files/2013-ben-bernanke.txt.
113 Daniel Watson, Deputy Assistant Secretary for Public Affairs, “There is Only One Solution to the Debt Limit,”
Treasury Notes, October 16, 2015, https://www.treasury.gov/connect/blog/Pages/one-solution-debt-limit.aspx.
114 Testimony of Treasury Secretary Janet Yellen, in U.S. Congress, House Committee on Financial Services, Federal
Reserve’s Pandemic Response, 117th Cong., 1st sess., September 30, 2021.
115 Rohan Grey, “Administering Money: Coinage, Debt Crises, and the Future of Fiscal Policy,” Kentucky Law Review,
vol. 109, no. 2 (2020), pp. 229-298.
116 Philip A. Wallach, “A Trillion Dollar Platinum Coin to Fix the Debt Ceiling: Why not 100 Trillion!?” Brookings
Institution web blog, October 26, 2015, https://www.brookings.edu/blog/fixgov/2015/10/26/a-trillion-dollar-platinumcoin-to-fix-the-debt-ceiling-why-not-100-trillion/.
117 For a discussion of issues regarding issuance of such a coin, see “Why the $1 Trillion Platinum Coin Idea Won’t
Work,” January 8, 2013, http://goldandsilverblog.com/why-the-trillion-dollar-platinum-coin-wont-work-0450/.
118 See Charles I. Plosser, President and Chief Executive Officer, Federal Reserve Bank of Philadelphia, “Fiscal Policy
and Monetary Policy: Restoring the Boundaries,” 2012 Annual Report of the Federal Reserve Bank of Philadelphia;
https://www.philadelphiafed.org/publications/annual-report/2012/restoring-the-boundaries. Until 1981, the Federal
Reserve had limited authority to buy Treasury securities directly to meet emergency cash management circumstances.
See Kenneth D. Garbade, Direct Purchases of U.S. Treasury Securities by Federal Reserve Banks, Federal Reserve
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printing money. The latter option, however, would likely affect the value of the dollar by
signaling either a reluctance to make fiscal adjustments or that monetary policy goals had been
subordinated to other ends. As a senior Federal Reserve official stated,
central banks are generally assigned the responsibility for establishing and maintaining the
value or purchasing power of the nation’s monetary unit of account. Yet, that task can be
undermined or completely subverted if fiscal authorities independently set their budgets in
a manner that ultimately requires the central bank to finance government expenditures with
significant amounts of seigniorage in lieu of tax revenues or debt.119
Third, were the U.S. Treasury to obtain cash balances via such a strategy, the debt limit would
likely continue restricting the issuance of federal securities, potentially disrupting scheduled
auctions and undermining the U.S. Treasury’s reputation for regular and predictable debt
operations.120 Such disruptions could raise federal borrowing costs.121
Senator Lee introduced S. 185 (117th Congress) on February 2, 2021, which would limit the face
value of platinum coins issued by the Treasury to $200. Representative Tlaib introduced H.R.
1030 (117th Congress) on February 11, 2021, which would direct the U.S. Treasury to mint and
issue two $1 trillion platinum coins and direct the Federal Reserve to purchase the coins.
Proceeds would fund payments to individuals.
Point of Clarification 5: The Public Debt Clause’s
Effect on the Statutory Debt Limit
Some commentators have also argued that if the statutory debt limit were to prevent the federal
government from paying obligations, the resulting default would violate a provision of the
Fourteenth Amendment commonly referred to as the “Public Debt Clause.”122 Ratified in 1868,123
the Public Debt Clause 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. But neither the United States nor any State shall assume
or pay any debt or obligation incurred in aid of insurrection or rebellion against the United
States, or any claim for the loss or emancipation of any slave; but all such debts, obligations
and claims shall be held illegal and void.124
Bank of New York Staff Report No. 684, August 2014.
119 Id. Seigniorage is the market value of currency minus the cost of minting coins or printing banknotes.
120 Kenneth Garbade, “The Emergence of ‘Regular and Predictable’ as a Treasury Debt Management Strategy,”
Federal Reserve Bank of New York Economic Policy Review, vol. 13, no. 1 (March 2007),
https://www.newyorkfed.org/research/epr/07v13n1/0703garb.html.
121 U.S. Treasury, “The Meaning and Implications of ‘Regular and Predictable’ as a Tenet of Debt Management,”
presentation at Treasury Borrowing Advisory Council, August 2015, https://www.treasury.gov/resource-center/datachart-center/quarterly-refunding/Documents/August2015TBACCharge1.pdf.
122 For example, see Paul M. Krawzak, “Debt Limit Options Narrowing, 14th Amendment Chatter Returns,” Roll Call
September 20, 2021, https://www.rollcall.com/2021/09/20/debt-limit-options-narrowing-14th-amendment-chatterreturns/.
123 See Certification of Secretary of State William H. Seward that the Fourteenth Amendment of the Constitution has
been Adopted (July 28, 1868), reprinted in 15 Stat. 708 (1868).
124 U.S. CONST. amdt. XIV, § 4.
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The legislative history of this provision, as well as its interpretation by the federal courts, shed
some light on its potential application to the statutory debt limit. However, many questions
remain about the types of actions that would constitute “question[ing]” the “validity of the public
debt of the United States.”
Why Does the Fourteenth Amendment Have a Public Debt Clause?
Framers of the Fourteenth Amendment sought to assert federal powers to protect civil rights and
ensure that the eventual reentry of former Confederate states would not lead to a rollback of
constitutional reforms. During the latter part of the Civil War, Members of Congress began to
consider the issue of reconstruction. In 1864, the Wade-Davis Bill, passed by Congress but pocket
vetoed by President Lincoln, included a clause that “No debt, state or confederate, created by or
under the sanction of the usurping power, shall be recognized or paid by the state.”125 After the
Confederate surrender, the assassination of President Lincoln, the attempted assassination of the
Secretary of State, and the inauguration of President Andrew Johnson in April 1865,
congressional leaders took more direct initiatives to shape the reconstruction process.
Establishment of federal guarantees for civil and political rights for former slaves became a
central aim of a strong majority of lawmakers.126 Many realized that extending political rights to
former slaves would mean superseding the three-fifths clause that set out rules for apportionment
of House seats in Article I, Section 2 of the Constitution. Counting former slaves as whole
persons for purposes of apportionment would eventually increase the size of delegations from
former Confederate states.127 Representative James Garfield estimated that those states would
gain at least 15 seats and others estimated gains of some 40 to 60 seats.128 Such potential shifts in
political power raised alarms that a future coalition could emerge that would repudiate federal
debts.129 While federal guarantees for an expansion of the franchise were viewed as a
counterweight to such shifts, an explicit guarantee of the validity of federal debts was also
included.130
125 National Archives and Records Administration, “Transcript of Wade-Davis Bill (1864),”
https://www.ourdocuments.gov/doc.php?flash=true&doc=37&page=transcript.
126 Joseph B. James, The Framing of the Fourteenth Amendment (Urbana: University of Illinois Press, 1956), pp. 3-20.
127 Ibid., p. 22. On September 18, 1866, New York Herald editor James Gordon Bennett estimated that southern states
would gain 40 seats if the franchise were restricted to white voters and 61 seats with universal (male) franchise (p. 5).
128 The 1860 Census results indicated a House of 243 Members, although due to secession the 39 th Congress had only
193 Members. See Office of the Historian, U.S. House of Representatives, 39th Congress Profile,
http://history.house.gov/Congressional-Overview/Profiles/39th/. Also see archived CRS Report 95-791, House of
Representatives: Setting the Size at 435, by David C. Huckabee, available to congressional clients upon request.
129 James (op. cit., pp. 23-27). On August 16, 1865, Treasury Secretary McCulloch wrote to Sen. Sumner that “nothing
can be more damaging to our national credit than the openly-expressed opinion by leading men, that there may arise
contingencies in which the national debt will be repudiated.” Quoted in James (p. 25). James (p. 185) suggests that the
prospects of repudiation were exaggerated, although several ex-Confederate states repudiated state debts in the postCivil War period. See William Scott, Repudiation of State Debts: A Study in the Financial History of Mississippi,
Florida, Alabama, North Carolina, South Carolina, George, Louisiana, Arkansas, Tennessee, Minnesota, Michigan,
and Virginia (Boston: Crowell, 1893). Rep. John Bingham, one of the framers of the amendment, asserted that “Unless
this Congress, charged as it is, like the first Continental Congress, with the care of the liberties of all, shall perform the
duty enjoined upon it, and send to the people the necessary constitutional provisions and guarantees for the future
safety of the Republic, I apprehend that there are men now within these walls who may learn, when it is too late, that
the ballot in the hand of the conspirator is more dangerous to the safety of the Republic than the bayonet.”
Congressional Globe, January 25, 1866, pp. 428-429.
130 Some Civil War loan issues were marketed widely to the public soon after hostilities commenced in 1861. Providing
a constitutional guarantee for federal debt, therefore, may have served political as well as financial ends. See Franklin
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The Public Debt Clause: Judicial Interpretation and Open
Questions
Though the Public Debt Clause was ratified in 1868, the Supreme Court has interpreted it in a
controlling opinion only once, in relation to a key aspect of early New Deal reforms. 131 This
single decision, Perry v. United States,132 leaves unanswered many questions concerning the
limitations imposed by the Public Debt Clause.133 The Clause’s potential application to a failure
to service debt on account of the debt limit statute is therefore unclear. This report first examines
Perry and then notes the questions that remain concerning the Public Debt Clause’s effect.
Perry v. United States
Executive and legislative actions affecting the country’s gold supply figured prominently in the
opening months of President Franklin D. Roosevelt’s New Deal.134 In his second fireside chat,
broadcast on May 5, 1933, the President outlined his view of the challenges posed to that gold
supply by the practice of public and private debtors—including the federal government—
agreeing to redeem their debts in gold.135 The President stated that these promises affected up to
$100 billion in public and private debt, roughly 25 times the domestic gold supply.136 The
President described a potential consequence of this disparity:
If the holders of these promises to pay started in to demand gold the first comers would get
gold for a few days and they would amount to about one-twenty-fifth of the holders of the
securities and the currency. The other twenty-four people out of twenty-five, who did not
happen to be at the top of the line, would be told politely that there was no more gold left. 137
The President stated that rather than allow such events to unfold, the federal government had
“decided to treat all twenty-five in the same way in the interest of justice and the exercise of the
constitutional powers of this Government.”138
Accordingly, in June 1933, the President signed into law a joint resolution declaring that
provisions requiring an obligee to pay in gold or in an amount of money measured in gold (gold
clauses) obstructed Congress’s power to regulate the value of money.139 Congress declared gold
Noll, “Repudiation! The Crisis of United States Civil War Debt, 1865-1870,” working paper, Graduate Institute of
International and Development Studies, Geneva, December 2012.
131 See Michael Abramowicz, Beyond Balanced Budgets, Fourteenth Amendment Style, 33 TULSA L.J. 561, 610 (1997)
(“Probably few constitutional provisions have, like the Public Debt Clause, effectively been forgotten.”).
132 294 U.S. 330 (1935).
133 Commentators have struggled with Perry’s meaning since the decision issued. See, e.g., Henry M. Hart, Jr., The
Gold Clause in United States Bonds, 48 HARV. L. REV. 1057, 1057 (1935) (“Few more baffling pronouncements, it is
fair to say, have ever issued from the United States Supreme Court.”).
134
See CRS Report R44704, Has the U.S. Government Ever “Defaulted”?, by D. Andrew Austin, at 9-11.
135 2 PUB. PAPERS AND ADDRESSES OF FRANKLIN D. ROOSEVELT 165–66 (1938).
136 Id.
137 Id. at 166.
138 Id. Likewise, the House Committee on Banking and Currency argued that gold clauses encouraged hoarding and the
export of gold, thereby interfering with Congress’s ability to create a currency and set its value. H. REP. NO. 73-169, at
1–2 (1933).
139 Pub. Res. No. 73-10, 48 Stat. 112, 112 (1933) (second whereas clause). In favorably reporting the joint resolution,
the Senate Committee on Banking and Currency explained that the measure would “completely regularize[] the present
de facto situation as to both public and private debts”—which as a result of earlier legislative and executive actions
were already not capable of being paid in gold—in advance of new, needed bond offerings scheduled for June 1933.
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clauses to be against public policy and repealed those provisions of federal law authorizing
issuance of federal obligations with a gold clause.140 Existing obligations that carried a gold
clause were to be “discharged upon payment, dollar for dollar, in any coin or currency which at
the time of payment is legal tender for public and private debts.”141
John Perry was one federal bondholder affected by the joint resolution. He held a $10,000 Liberty
Bond, issued in 1918 pursuant to authorization granted by Congress.142 Its principal and interest
were “payable in United States gold coin of the present standard of value.”143 In May 1934, Perry
presented the bond for payment.144 The United States refused to pay in gold.145 Instead, as
required by the June 1933 joint resolution, it offered $10,000 in legal tender.146 Perry asserted that
this offer breached the government’s bond obligations.147 Perry argued he was entitled to payment
either in gold of a specified weight or $16,931 in U.S. currency,148 with the latter figure reflecting
that in January 1934 the President had fixed the weight of the gold dollar at roughly 59% of its
former weight.149
Perry sued in the Court of Claims, claiming breach of contract and arguing that the joint
resolution unconstitutionally deprived him of property without due process.150 The Court of
Claims certified a question to the Supreme Court, asking whether Perry was “entitled to receive
from the United States an amount in legal tender currency in excess of the face amount of the
bond.”151 In Perry v. United States, the Supreme Court answered “no” to the certified question,
but not before considering the extent of the government’s obligation under the bond and the joint
resolution’s constitutionality.152 Along the way, it construed the Public Debt Clause.
Writing for the Court,153 Chief Justice Charles Evans Hughes first described the obligation that
the federal government undertook when it issued the bond with a gold clause. By stipulating that
See S. REP. NO. 73-99, at 2 (1933); see also supra note 134.
140 48 Stat. at 113.
141 Id.
142 Perry v. United States, 294 U.S. 330, 346, 347 (1935).
143 Id. at 347.
144 Id.
145 Id.
146 Id.
147 See id.
148 Id.; see also id. at 355 (describing Perry’s damages computation in more detail).
149 See, e.g., Proclamation No. 2072, reprinted in 3 PUB. PAPERS AND ADDRESSES OF FRANKLIN D. ROOSEVELT, at 67–69
(1938).
150 Perry, 294 U.S. at 347.
151 Id. The Court of Claims certified a second question, concerning impossibility of performance, but the Supreme
Court ultimately concluded that an answer to this second question was “not necessary” given its answer to the first. See
id. at 348, 358.
152 Id. at 358. The Court decided Perry the same day that it decided other cases challenging government action
affecting gold, likewise denying relief to these other plaintiffs. Together with Perry, these cases have been referred to
as the “Gold Clause Cases.” See Nortz v. United States, 294 U.S. 317 (1935) (challenge by holder of Treasury gold
certificates to the federal government’s refusal to pay out gold coin and requirement to surrender gold certificates to the
Secretary of the Treasury in exchange for legal tender of an equivalent face amount); Norman v. Baltimore & O.R. Co.,
294 U.S. 240 (1935) (two cases involving railroad bonds containing gold clauses).
153 Perry, 294 U.S. at 346. In a concurrence, then-Justice Harlan F. Stone expressly declined to join the portions of
Chief Justice Hughes’s opinion that held the joint resolution exceeded Congress’s authority. Justice Stone thought such
comments unnecessary to decide the certified question and could impede Congress’s future ability to make changes to
the value of money. See id. at 359–61 (Stone, J., concurring); see also, e.g., Gerard Magliocca, The Gold Clause Cases
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the bond would be payable in gold coin “of the present standard of value,” the United States
assured those lending it funds they would not suffer loss through depreciation in the payment
medium.154
Chief Justice Hughes then considered the joint resolution in light of this obligation, asking
whether Congress could use its power to regulate the value of money to invalidate the terms of
existing obligations issued under its separate power to borrow money on the credit of the United
States.155 If Congress had the power under the Coinage Clause to modify contract terms, then it
would “inevitably follow[]” that Congress could repudiate its obligation to repay any sums at
all.156 Chief Justice Hughes refused to construe the Constitution as granting Congress such
power.157 “When the United States, with constitutional authority, makes contracts,” he explained,
“it has rights and incurs responsibilities similar to those of individuals who are parties to such
instruments,” except that federal government may be sued only with its consent.158
Chief Justice Hughes rejected the contention that the government could not contract away the
exercise of its sovereign powers—by, for example, irrevocably committing to repay debt in gold
coin.159 The right to make a binding obligation was an incident of sovereignty, and Congress acts
as an instrumentality of that sovereignty when its exercise its legislative powers.160 But by
authorizing Congress to make “definite obligations for the payment of money borrowed,” the
Constitution did not also confer “authority to alter or destroy those obligations.”161
Chief Justice Hughes then referenced the Public Debt Clause, providing the only interpretation of
the Clause that has appeared in a controlling opinion:
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.” While this
provision was undoubtedly inspired by the desire to put beyond question the obligations of
the government issued during the Civil War, its language indicates a broader connotation.
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
and Constitutional Necessity, 64 FLA. L. REV. 1243, 1269 (2012) (stating that Chief Justice Hughes’s opinion reflected
only a “plurality” view insofar as it declared the joint resolution unconstitutional); Neil H. Buchanan & Michael C.
Dorf, How to Choose the Least Unconstitutional Option: Lessons for the President (and Others) from the Debt Ceiling
Standoff, 112 COLUM. L. REV. 1175, 1190–91 (2012) (arguing that Perry’s discussion of the Public Debt Clause,
“though appearing in the controlling opinion of the case, was not endorsed by a majority of the Justices of the Court”
and adding that the discussion is “arguably dicta” that the Court has not “definitively endorsed” in a “legally binding
fashion” (footnote omitted)).
154 Perry, 294 U.S at 348–49.
155 Id. at 350; see also U.S. CONST. art. I, § 8, cl. 2 (“The Congress shall have Power” to “borrow Money on the credit
of the United States.”); id. at art. I, § 8, cl. 3 (“The Congress shall have Power” to “coin Money, regulate the Value
thereof, and of foreign Coin, and fix the Standard of Weights and Measures.”); see also supra note 153 (noting that
Justice Stone declined to fully join Chief Justice Hughes’s opinion).
156 Perry, 294 U.S. at 350.
157 Id.
158 Id. at 352 (citing United States v. Bank of Metropolis, 40 U.S. 377, 392 (1841)).
159 Id. at 353–54.
160 Id. at 353.
161 Id.
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considering the expression “the validity of the public debt” as embracing whatever
concerns the integrity of the public obligations. 162
On the basis of this discussion—with its references to the Borrowing Clause, the Coinage Clause,
prior Supreme Court precedent affirming the inviolability of federal obligations, and the Public
Debt Clause—Chief Justice Hughes concluded that the joint resolution exceeded Congress’s
authority.163
Having agreed with Perry that the joint resolution exceeded Congress’s authority, the Court
nonetheless answered the certified question “no,” an answer that denied Perry any relief.164 The
Court explained that to prevail on his breach-of-contract claim, Perry had to demonstrate actual
damages resulting from the government’s breach of the gold clause.165 Damages “could not be
assessed without regard to the internal economy of the country at the time the alleged breach
occurred.”166
Features of this “internal economy” prevented Perry’s theory from showing harm suffered on
account of breach of the gold clause. By May 1934, a “free domestic market for gold was
nonexistent.”167 While Perry alternatively demanded the “equivalent” in currency of the gold coin
promised in 1918, the Court wrote that “‘equivalent’ cannot mean more than the amount of
money which the promised gold coin would be worth to the bondholder for the purposes for
which it could legally be used.”168 Congress had lawfully established a “restricted market” in
gold,169 which impacted the purchasing power of the dollars Perry could have received but for the
breach.170 However, Perry’s theory of damages did not account for these changes.171 His theory
assumed he was entitled to receive payment in legal tender according to the weight of the dollar
that existed before the January 1934 devaluation.172 The Court concluded that payment of this
amount “would appear to constitute, not a recoupment of loss in any proper sense, but an
unjustified enrichment.”173
162 Id. at 354.
163 Id. (“We conclude that the Joint Resolution of June 5, 1933, in so far as it attempted to override the obligation
created by the bond in suit, went beyond the congressional power.”).
164 See id. at 358. Gerard Magliocca argues that the result in Perry can be explained, at least in part, by the high stakes
involved in the decision of whether to provide a remedy to those seeking to enforce gold clauses. As proof of these
stakes, Magliocca points to the draft text of a fireside chat that, if delivered, would have “raised profound questions
about the separation of powers” insofar as it appeared to contemplate the “President refus[ing] to follow the law as
articulated by the Court.” See Magliocca, supra note 153, at 1264 & 1277 (reproducing draft text of fireside chat). The
Court decided the Gold Clause Cases to deny petitioners relief and therefore President Roosevelt did not deliver the
address. See id. at 1262.
165 Perry, 294 U.S. at 354–55.
166
Id. at 357.
167 Id.
168 Id.
169 Id.; see also, e.g., supra note 134.
170 Perry, 294 U.S at 357.
171 Id. at 358.
172 Id.
173 Id. In August 1935, six months after the Court decided Perry, Congress withdrew any waiver of sovereign immunity
with respect to, among others, gold-clause securities, defining that category by reference to the June 1933 joint
resolution. See Pub. Res. No. 74-63, §§ 2, 4, 49 Stat. 938, 939 (1935).
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Questions Concerning the Public Debt Clause
Several questions remain concerning the effect of the Public Debt Clause on the federal
government’s debts. First, the Court has repeatedly affirmed the generally binding nature of the
federal government’s contractual obligations.174 However, except in Perry, the Court has not
rooted such conclusions in the text of the Public Debt Clause or otherwise interpreted the
clause.175 Lynch v. United States,176 decided eight months before Perry, exemplifies a more
common basis for describing the binding nature of the federal government’s contractual
obligations. There, the Court examined a statute that purported to repeal laws granting war risk
insurance.177 The Court characterized this repeal as abrogating “outstanding contracts and
reliev[ing] the United States from all liability on the contracts without making compensation to
the beneficiaries.”178 It unanimously held this abrogation violated the Fifth Amendment’s Due
Process Clause.179 The Court has occasionally cited Lynch and Perry in tandem, without
distinguishing between limitations imposed by the Fifth versus the Fourteenth Amendment.180 As
a result, the Court has not further examined the Public Debt Clause or the broad construction
given the clause in Perry, as “embracing whatever concerns the integrity of the public
obligations.”181
174 See, e.g., United States v. Bank of Metropolis, 40 U.S. 377, 392 (1841) (“When the United States, by its authorized
officer, become a party to negotiable paper, they have all the rights, and incur all the responsibility of individuals who
are parties to such instruments. We know of no difference, except that the United States cannot be sued” without its
consent).
175 Perry’s conclusion regarding the joint resolution’s validity is itself not solely rooted in the Public Debt Clause. See,
e.g., Perry, 294 U.S. at 353 (construing the Borrowing Clause); see also supra note 163 and accompanying text.
176 292 U.S. 571 (1934) (Brandeis, J.) (unanimous).
177 Id. at 575–76.
178 Id. at 579.
179 Id. (explaining that, though the federal government was in “great need of economy” in 1933, “Congress was without
power to reduce expenditures by abrogating contractual obligations of the United States”).
180 See Cherokee Nation of Okla. v. Leavitt, 543 U.S. 631, 646 (2005) (citing Lynch and Perry as support for the rule
that a “statute that retroactively repudiates the Government’s contractual obligation may violate the Constitution”);
Bowen v. Public Agencies Opposed to Soc. Sec. Entrapment, 477 U.S. 41, 52 (1986) (citing Lynch and Perry for the
proposition that the federal government has the power to enter into contracts that vest rights in third parties); United
States v. Larionoff, 431 U.S. 864, 879 (1977) (citing Lynch and Perry in the course of noting that action by Congress to
“deprive a service member of pay due for services already performed” would “appear in a different constitutional light”
than action to “prospectively reduce” service member pay before services are performed).
181 Perry, 294 U.S. at 354 (emphasis added). The federal courts of appeals also have not extensively examined the
Public Debt Clause’s prohibition on questioning the validity of the public debt. In 2016, a federal appeals court
affirmed dismissal of a suit challenging the statutory debt limit on, among others, Public Debt Clause grounds.
According to the court, the bondholder plaintiff failed to plausibly allege either current injury or nonconjectural future
injury caused by the dollar limit on federal borrowing. See Williams v. Lew, 819 F.3d 466, 473 (D.C. Cir. 2016). A
1987 amendment to the Higher Education Act of 1965 (HEA) likewise drew Public Debt Clause challenges.
Participants in a federal loan insurance program argued they had contractual rights against the government to receive
certain reinsurance payments. The government allegedly repudiated those rights when it withheld reinsurance payments
from entities that had refused to comply with the 1987 amendment’s requirement to transfer excess cash reserves to the
student loan insurance fund. Courts of appeals held that the United States had not repudiated its contractual obligations,
as Congress did not unambiguously surrender its authority to amend the HEA to alter the regulatory scheme that
defined entitlement to reinsurance payments, and thus found no Public Debt Clause violation. See Great Lakes Higher
Educ. Corp. v. Cavazos, 911 F.2d 10, 18 (7th Cir. 1990) (“[N]either Congress, through the 1987 amendment, nor the
Secretary has questioned any valid debt. The Secretary took nothing from the agency except the use of funds made
available through circumstances unanticipated by either Great Lakes or the United States.”); Ohio Student Loan Com.
v. Cavazos, 900 F.2d 894, 902 (6th Cir. 1990) (reversing district court judgment that found a Public Debt Clause
violation and explaining that because there was “no abrogation of the ‘contract’ in the instant case, we conclude that
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Second, commentators continue to debate at least two aspects of the Public Debt Clause’s
application to federal commitments. Commentators have argued that the Public Debt Clause may
require a distinction in the types of commitments that constitute the “public debt.”182
Commentators have also advanced a range of views concerning the set of facts under which the
federal government would be deemed to have “questioned” the validity of the public debt. For
example, one commentator has argued that the most likely explanation for the Public Debt
Clause’s language is that it was intended to “simply declare[] that all public debt that was valid
(i.e., ‘authorized by law’) would remain valid.”183 A second commentator has cast the Public Debt
Clause as prohibiting not only the “total repudiation” of federal debt, but also those defaults on
debts that persist for a substantial time period or for which bondholders are not made whole.184 A
third commentator has advanced a “broad construction” of the clause under which “governmental
actions short of direct repudiation may trigger the Public Debt Clause if they endanger the
validity of debts.”185
Given these uncertainties surrounding the Public Debt Clause generally, it is unclear how the
provision might apply to the statutory debt limit in particular. Depending on one’s construction of
the clause, some nonpayments occasioned by the statutory debt limit might not be circumstances
“question[ing]” the validity of the public debt.186 Such nonpayment would not resemble the
congressional action that confronted the Court in Perry, an express abrogation of the
government’s gold clause obligations.187 If obligees are made whole after Congress permits
resumed debt service and other payments (i.e., raising or suspending the debt limit, cutting
spending, or increasing taxes), Public Debt Clause concerns would be further ameliorated.188
Separately, even if temporary nonpayment could constitute a Public Debt Clause violation with
there was no violation of section four of the Fourteenth Amendment”).
182 See, e.g., Abramowicz, supra note 131, at 600 & 600 n.191 (noting ways that commitments incurred under fully
performed service contracts might differ from commitments under the Social Security or Medicare programs);
Laurence Tribe, Guest Post on the Debt Ceiling by Laurence Tribe, DORF ON LAW (July 16, 2011),
http://www.dorfonlaw.org/2011/07/guest-post-on-debt-ceiling-by-laurence.html (arguing that the Public Debt Clause
would not forbid the federal government from prioritizing certain payments over others if it cannot make all legally
required payments as a result of the statutory debt limit, because not all “legally required payments are part of the debt
whose validity cannot ‘be questioned.’”); Michael McConnell, The Debt Ceiling Is Certainly Not “Unconstitutional,”
ADVANCING A FREE SOCIETY (Jul 4, 2011), https://www.hoover.org/research/debt-ceiling-certainly-not-unconstitutional
(arguing that “at most” the Public Debt Clause’s prohibition on questioning the validity of the public debt “means that
paying the public debts and pension obligations of the United States, as they become due, has priority over all other
spending”).
183 See Michael Stern, “Threatening Default”: A Response to Professor Balkin, POINT OF ORDER (July 1, 2011),
https://www.pointoforder.com/2011/07/01/threatening-default-a-response-to-professor-balkin/.
184 Magliocca, supra note 153, at 1256; see also Gerard Magliocca, Section Four of the Fourteenth Amendment
(Again), BALKINIZATION (Sept. 20, 2021), https://balkin.blogspot.com/2021/09/section-four-of-fourteenthamendment.html (arguing that the Public Debt Clause applies only to “substantial” questioning of the public debt
because, in the years after the Public Debt Clause’s adoption, Congress undertook currency reforms that “changed the
value” of federal debts without contemporary observers thinking “that this raised a Section 4 problem”).
185 See Abramowicz, supra note 131, at 596; see also Jack Balkin, The Legislative History of Section Four of the
Fourteenth Amendment, BALKINIZATION (June 30, 2011), https://balkin.blogspot.com/2011/06/legislative-history-ofsection-four-of.html (similarly arguing, based on the Public Debt Clause’s legislative history, that the Clause prohibited
“threat[s] of defaulting on government obligations”); but see Stern, supra note 183 (critiquing Balkin’s conclusions).
186 U.S. CONST. amdt. XIV, § 4.
187 Perry, 294 U.S. at 354; but see Robert A. Levy, Defaults, Debt Ceilings and the 14 th Amendment, CATO INSTITUTE
(July 7, 2011), https://www.cato.org/commentary/defaults-debt-ceilings-14th-amendment (“If a friend refused to repay
my loan when due, while assuring me that he would get around to it at an indefinite future date, I would be hard‐
pressed to intuit that his default—although not a repudiation—left me with a debt of unquestioned validity.”).
188 See supra note 184.
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respect to certain debts (e.g., bond debt), the government’s failure to make other payments (e.g.,
to fund certain grant awards) might not concern the “public debt” within the meaning of the
clause.189
Concluding Question: Is the Debt Limit Obsolete?
Various policymakers, former Treasury officials,190 and commentators have called for eliminating
the debt limit on grounds that it is “obsolete,”191 simply gives a venue to “stir up debate about
debt,”192 or is redundant because the need to issue debt results from the excess of spending over
revenues. If Congress were to choose to delegate more of its Article I Section 8 powers of the
purse to the U.S. Treasury and the executive branch, some financial risks and contentious debates
might conceivably be side-stepped.
While many have called for eliminating the debt limit or making it more automatic, those who
have examined how that might be accomplished found themselves facing constitutional, legal,
and procedural barriers, as noted in the discussion of events leading to the 1979 Gephardt
Amendment.193
Others argue that control over debt is a critical third leg of the congressional power of the
purse.194 While the other two legs—the power to authorize spending and the power to collect
taxes—allow Congress to fine tune policies and priorities, the debt limit is a blunt instrument.
Modifying the debt limit typically involves either a change in the limit amount or the date through
when a suspension extends. That bluntness, however, may have the advantage of inducing
policymakers to focus on fundamental fiscal issues from time to time.
Author Information
D. Andrew Austin
Analyst in Economic Policy
Sean M. Stiff
Legislative Attorney
189 See supra note 182.
190 David Wilcox (former director of the Federal Reserve Board’s Division of Research and Statistics and former
Treasury Assistant Secretary for Economic Policy), “Don’t Just Raise the Debt Ceiling, Eliminate It,” Washington
Post, October 5, 2021.
191 Matthew Yglesias, “The Looming Debt Ceiling Fight, Explained,” Vox, August 9, 2017, https://www.vox.com/
policy-and-politics/2017/8/9/16112364/debt-ceiling-explained.
192 Bruce Bartlett (former Deputy Assistant Treasury Secretary for Economic Policy), “Why Congress Must Now
Abolish its Debt Limit,” New York Times, October 22, 2009.
193 See section “House Explores Tying Debt Limit to Congressional Budget Process: the “Gephardt Rule” above.
194 Anita S. Krishnakumar, In Defense of the Debt Limit Statute, 42 HARVARD JOURNAL ON LEGISLATION 135 (2005).
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