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

208 United States Sovereign Debt: A Thought Experiment On Default And Restructuringword “validity” does not implicitly contain such a distinction,and it is not modified by the word “legal.” Reading the distinctioninto [Section Four] . . . would allow the government topass one statute providing that debts shall be legally valid, butanother providing that the Treasury must not make payment onthem. This perverse definition of validity would allow an endrunaround . . . [Section Four] and would defy the Framers’ intentto reassure debt-holders that their debts will be honored. 111Whether Section Four should be construed to permit Congress totake the approach that Abramowicz describes in his hypothetical isa fair question. But it hardly seems perverse to read the word “validity”as used in the Constitution to mean “legally valid.” Indeed, it isreading “validity” to have a meaning other than legally valid whichwould be perverse.The point made by Abramowicz can be reframed. It is true that a lawthat instructs the Executive Branch or gives it discretion to declineto pay obligations on Treasuries largely achieves the same result asinvalidation. 112 (That is the point, of course, of Alternative 2.) Butthe analysis need not hinge on a misunderstanding of the meaningof “validity” as something other than legal validity. Giving “validity”its usual meaning, the argument would be that even if a law providesin so many words that debt is valid, but the same or another law alsopermits nonpayment of the debt, it is not legally valid construingthe relevant law as a whole. This is a more plausible analysis thandistorting the meaning of “validity” beyond recognition. In a propercase, this reasoning could plausibly justify equating default (or evena threat of default) with invalidity.Jack Balkin also views a legislative threat of default as a questioningof the validity of the public debt. He considers Senator Wade’s proposaland supporting speech to support this view.111 Abramowicz, Train Wrecks, supra note 76, at 26 n.109.112 This would be especially so if the consent of the U.S. to be sued were withdrawn,though the possibility of foreign judgments and process on foreign assetswould remain. See text at notes 141-44, infra.