The 14th Amendment and the Debt Limit
The debt limit is the amount of money the United States government can borrow to pay its existing legal obligations. These include Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and more.
In June 2023, the Fiscal Responsibility Act of 2023 suspended the debt limit through January 1, 2025. The U.S. Treasury anticipates that sometime thereafter, say, somewhere between January 14 and January 23, the U.S. government would be required to take extraordinary measures to not default on its obligations. After all, default is not an option.
In Section 4 of the 14th Amendment, the U.S. Constitution reads that “the validity of the public debt of the United States, authorized by law…shall not be questioned.” The Amendment was adopted in 1868.
A Congress during Reconstruction adopted Section 4 after the Union borrowed by issuing federal bonds as a means of financing the Civil War and pensions for army veterans who fought in the war.
The Democratic Party at the time, run by former Confederate slaveholders, announced that it intended to deny the bond obligations if it gained control of Congress in the coming 1868 election. Congress adopted Section 4, and the states ratified it, to avoid a partisan default.
A debt limit would cap the funds that can be borrowed to meet the government’s financial obligations. The Fourteenth Amendment’s Public Debt Clause mandates that the federal government meet its financial obligations.
The Public Debt Clause could be violated in the event that government actions undermine confidence about the validity of the public debt. This might happen when the government falls short of defaulting in or repudiating the public debt. A test to determine if considerable doubt arises might entail an analysis of the political and economic environment and the attitude of debt holders.
Bitcoin Only Way Out
Since bankruptcy is not an option, Bitcoin is the only way out for the U.S. runaway debt situation.
It appears as if Musk and Trump may agree. After all, Tesla holds approximately 10,000 bitcoin worth around $1 billion on its balance sheet. And in May, Trump said he could use bitcoin to pay off the debt with a “little crypto check.”
Trump has promised a “strategic national bitcoin reserve” and predicted bitcoin would outgrow gold’s $16 trillion market capitalization. In December, Trump confirmed plans to establish a U.S. Bitcoin Reserve.
“We’re gonna do something great with crypto because we don’t want China, or anybody else … but others are embracing it, and we want to be ahead,” Trump told CNBC.
Conclusion
In conclusion, the U.S. government is facing a significant debt crisis, and the 14th Amendment’s Public Debt Clause mandates that the federal government meet its financial obligations. With the debt limit suspended until January 1, 2025, the U.S. government will need to take extraordinary measures to avoid default. Bitcoin, as a potential solution, has been proposed by Elon Musk and Donald Trump, who have expressed support for a strategic national bitcoin reserve.
FAQs
Q: What is the debt limit?
A: The debt limit is the amount of money the United States government can borrow to pay its existing legal obligations.
Q: What is the 14th Amendment’s Public Debt Clause?
A: The Public Debt Clause mandates that the federal government meet its financial obligations and that the validity of the public debt of the United States, authorized by law, shall not be questioned.
Q: Why is the U.S. government facing a debt crisis?
A: The U.S. government is facing a debt crisis due to increased stimulus measures and historic government spending, which has sent inflation in 2022 to over 10%, forcing the Federal Reserve to hike interest rates.
Q: What is a strategic national bitcoin reserve?
A: A strategic national bitcoin reserve is a proposed reserve of bitcoin held by the U.S. government to stabilize the value of the currency and potentially use it to pay off the national debt.
Q: Who has proposed the idea of using bitcoin to pay off the national debt?
A: Elon Musk and Donald Trump have both proposed the idea of using bitcoin to pay off the national debt.
Q: What is the current market capitalization of bitcoin?
A: The current market capitalization of bitcoin is approximately $1 trillion.
Q: What is the current market capitalization of gold?
A: The current market capitalization of gold is approximately $16 trillion.
