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

Charles W. Mooney, Jrcans in Congress were concerned that a Democratic majority downthe road might “repudiate” the debt incurred by the Union duringthe war. 100 While not free of doubt, it appears that the “repudiation”to be feared was the possibility that Congress might determine thewartime debt was not lawfully incurred—i.e., was invalid. 101 MichaelAbramowicz, while explaining the phrase “authorized by law” in SectionFour, observed that, without the phrase, Section Four “wouldhave left open the possibility that a Democratic Congress could haverepudiated the Union’s Civil War bonds as illegal and not part of thepublic debt.” 102205Senator Benjamin Wade of Ohio offered the initial proposal of whatbecame the basis for Section Four. The proposal provided in pertinentpart that “[t]he public debt . . . shall be inviolable.” 103 Subsequently,Senator Howard introduced another proposal on the subjectwhich provided: “The obligations of the United States, incurred insuppressing insurrection, or in defense of the Union, or for paymentof bounties or pensions incident thereto, shall remain inviolate.” 104Howard’s version was approved by the Senate. 105 Both versions differsubstantially from Section Four as ultimately adopted—“[t]he va-Balkin, Legislative History], http://balkin.blogspot.com/2011/06/legislative-historyof-section-four-of.html.100 Id.101 This is a somewhat unusual use of “repudiate” and “repudiation,” which in thecontract context are understood to mean merely a clear and unequivacal statementby a party that it will not perform. See, e.g., 23 WILLISTON ON CONTRACTS §63:29 (Richard A. Lord, 4th ed.) (“A ‘repudiation’ is a statement by the obligor tothe obligee indicating that the obligor will commit a breach that would itself givethe obligee a claim for damages for total breach.”) Of course, invalidity (or assertedinvalidity) is one of many reasons why a party might choose to repudiate an obligation.102 Abramowicz, supra note 27, at 588 (emphasis added).103 Cong. Globe, 39th Cong., 1st Sess. 2768 (1866). Senator Wade revealed someconcern about a future default in fact. For example, he asked if “open and hostilerebels” were to be seated in Congress “who can guaranty that the debts of the Governmentwill be paid, or that your soldiers and the widows of your soldiers will notlose their pensions?” Id. at 2769. He argued that his proposal would “put the debtincurred in the civil war on our part under the guardianship of the Constitution.”Id.104 Cong. Globe, 39th Cong., 1st Sess. 2938 (1866).105 Id. at 2941.