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Sunday January 22, 2023 · 12:30 PM PST

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We are operating in a fictional world in which a myth is driving policy and markets. Review of relevant laws and the Constitution reveals this.*

On one hand:

  • the law supporting the “Debt Ceiling” derives from the 1917 “Liberty Bond” Act, passed to facilitate and control payment for US entry into World War 1, but ignored until Newt Gingrich resurrected it for blackmail purposes in the 1990s.

On the other hand:

  • The 14th Amendment to the Constitution states: “The validity of the public debt of the United States, authorized by law … shall not be questioned.”
  • All appropriations laws now in effect direct Congress to incur public debt to purchase and pay for everything the federal government does.

So the 1917 law conflicts with both the Constitution and scores of laws passed in the 2010s and 2020s directing payment of everything appropriated by the federal government (social security, defense, infrastructure, minor stuff like that).

So No. 1 — the 1917 Law is unconstitutional because it questions to validity of US public debt as prohibited by the 14th Amendment.

But even if that were not so, if the 1917 law prohibits payment for Congressionally appropriated programs, it conflicts with every law authorizing those programs. 

What do you do when two laws conflict? This article by the great Robert Hockett, Stop the Charade: The Federal Budget Is Its Own ‘Debt-Ceiling’ lists a bunch of reasons why the appropriations laws must prevail over the 1917 law. Here are just two:

  • Stopping payment for spending already incurred under current law based on a supposed 1917 Law leads to an absurd result: Under fundamental law, if “there is literally no possible rational interpretation, the putative ‘law’ in question [i.e., the 1917 Act] is treated as a nullity.”
  • In conflicts of laws, the more recently passed laws take precedence: “where two legislative enactments appear to conflict, the later enactment will be read as implicitly repealing the earlier one – at least as applied in any manner that yields conflict.”

President Biden and the US Treasury are bound by the more recent law and the law that leads to the only rational result. President Biden can tell the House, “The Law and the Constitution bind me to pay for debts Congress has appropriated. We intend to pay these debts as directed by law.”

This puts the burden on the House to get a Court to enjoin the federal government’s payment of debts lawfully incurred by acts of Congress. (These laws include those directing payment of salaries of federal employees, including judges and members of Congress.)

The only reason for Biden not to make this announcement is to reap the political benefits of the House publicly screaming for cuts to social security and entitlements and “threatening” to take us all hostage.  But this risks disturbing markets and other unintended consequences.

Summarizing thread by me:

As for the coin, as Professor Hockett notes in this podcast, the coin argument is based on a law intended to provide for commemorative coins.  Resorting to it is not dissimilar to using the 1917 Act to limit current spending.

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