US Government Debt Different - Finance Department - University of ...

194 United States Sovereign Debt: A Thought Experiment On Default And Restructuringseventy-five years. 53 The current version is found in Chapter 9 of theBankruptcy Code. 54 And recently a debate has emerged over whetherfederal bankruptcy law should be amended to permit states of theU.S. to become debtors. 55 Certainly nothing in the text of the BankruptcyClause itself would appear to limit the power of Congress toenact a bankruptcy law providing for discharge of the obligations ofa government, including the federal government. Bankruptcy lawis a branch of civil procedure law, the purpose of which is to protectand vindicate the rights of those with legal entitlements (e.g.,creditors) vis-a vis a debtor in financial distress. 56 As such, expandingbankruptcy law to embrace the U.S. federal government would bea coherent and logical extension of existing federal jurisdiction overclaims against the U.S. 57The Bankruptcy Clause does not dictate to Congress the metes andbounds of a bankruptcy law; such a law need only deal with the “uniformLaws on the subject of Bankruptcies throughout the UnitedStates.” 58 A bankruptcy law need not be situated in a stand-alone actdenominated as a bankruptcy law, 59 although that has been the approachin the U.S. 60 Could a bankruptcy law that applied only to theU.S. government as debtor be a “uniform Law[] . . . throughout theUnited States”? The Supreme Court addressed “the nature of the uni-53 The first municipal bankruptcy act was enacted in 1934. Pub. L. No. 251, 73dCong., 2d Sess., 48 Stat. 798 (1934).54 11 U.S.C. §§ 901-946.55 See, e.g., David Skeel, Give States a Way to Go Bankrupt, 16 The Weekly StandardNo. 11 (Nov. 29, 2010), available at http://www.weeklystandard.com/articles/givestates-way-go-bankrupt_518378.html?page=1;David A. Skeel, Jr., States of Bankruptcy,79 U. Chi. L. Rev. 677 (2012) (arguing in favor of a bankruptcy law forstates); Joe Weisenthal, More on Why the “State Bankruptcy” Idea Is Dangerous Nonsense,Business Insider (Jan. 24, 2011), available at http://articles.businessinsider.com/2011-01-24/markets/30021798_1_state-bankruptcy-tax-hikes-spending-cuts.56 See Mooney, Normative Theory, supra note 50, at 951-54.57 As discussed infra, claims against the U.S. government currently are subject tothe jurisdiction of the Court of Federal Claims. See note 134, infra.58 U.S. Const. art. I, § 8, cl. 4.59 See Steven L. Schwarcz, A Minimalist Approach to State “Bankruptcy,” 59 UCLAL. Rev. 322, 336 (2011).60 See Act of April 4, 1800, chap. 19, 2 Stat. 19 (repealed 1803); Act of August19, 1841, chap 9, 5 Stat. 440 (repealed 1843); Act of March 2, 1867, chap. 176,14 Stat. 517 (repealed 1878); Bankruptcy Act of 1898, chap. 541, 30 Stat. 544(repealed 1978); Bankruptcy Code, 11 U.S.C. §§ 101 et seq.