Constitutional Esoterica

I’m a law nerd.  I’d have to be to do this all of the time.  So a delight for somebody like me is to come across an obscure constitutional provision that was important in a particular case.  This recently happened as I was writing up my paper on the Gold Clause Cases.  The argument of the bondholder in Perry v. United States was that the Federal Government could not substantially repudiate (or devalue) its obligations by reducing the gold content of the dollar and applying that change to Treasury bonds issued prior to the revision.  In support of that argument, they cited, among other things, Section 4 of the Fourteenth Amendment.  I submit that even most constitutional experts don’t know what Section 4 says.  Here it is:

“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.”  [The rest of Section 4 says that neither the United States or any state shall pay Confederate debts or compensation to slaveholders.]

The bondholder in Perry claimed that the substantial devaluation of Treasury bonds was questioning the validity of the public debt contrary to Section 4’s command.  What’s more, the Supreme Court agreed.  Chief Justice Hughes’ opinion for the Court stated that Section 4 was “confirmatory of a fundamental principle” about the “integrity of the public obligations.” Of course, the Chief Justice then turned around and said the bondholder had no remedy for this constitutional violation (on pretty shaky grounds).  And, as far as I know, that was the last time anyone cited Section 4 to the Court.  Until, of course, somebody decides to litigate the deliberate creation of inflation by a future Congress or Federal Reserve.

UPDATE:  I’ll be offline for the next week-and-a-half for Fall Break.

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4 Responses

  1. Albert K. Echt says:

    The not so secret agenda of the Christian Right includes outlawing alcohol and beer. Why does no one call them out on this? This issue will make voters vote! It could change the midterm elections.

    Albert K. Echt

  2. Ken Rhodes says:

    Fascinating possibility in your final sentence.

    But I wonder about this one: “Of course, the Chief Justice then turned around and said the bondholder had no remedy for this constitutional violation (on pretty shaky grounds).”

    The opinion stated: “(i) Plaintiff has not attempted to show that, in relation to buying power, he has sustained any loss; on the contrary, in view of the adjustment of the internal economy to the single measure of value as established by the legislation of the Congress, and the universal availability and use throughout the country of the legal tender currency in meeting all engagements, the payment to the plaintiff of the amount which he demands would appear to constitute not a recoupment of loss in any proper sense, but an unjustified enrichment.”

    That doesn’t sound shaky to me; rather, it sounds like Chief Justice Hughes was saying “The deflation we’ve experienced has made your suit moot; you haven’t suffered a loss to be compensated.”

    That argument, of course, would not be valid in your last-sentence hypothetical.

  3. The Chief Justice’s argument is indeed shaky, in as much as the “unjust enrichment” consisted of nothing more than the bondholders being paid according to the terms of their loan.

  4. Bruce Boyden says:

    I know nothing about Section 4 other than what it says. But I would have interpreted it as meaning that *other* entities (such as Southern states) can’t question the validity of the public debt, not that the U.S. government can’t do something that affects the validity of its own debt.