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

212 United States Sovereign Debt: A Thought Experiment On Default And Restructuringetary policy. A decision not to print money is as much an exerciseover monetary policy as a contrary decision. As in Perry, under Alternative2, the exercise by Congress of its power over monetary policywould leave non-exempt Treasury holders with less than the full benefitof their bargains. As in Perry, however, this result would preventSection Four and the non-abrogation principle from overriding thepower over monetary policy.The discussion of Alternative 2 to this point has focused on the validityof the U.S. obligations, which Alternative 2 would not purportto affect. But the constitutionality of Alternative 2 also mustbe tested from another perspective that arises out of the sovereignnature of Treasuries. Certainly, holders of Treasuries have civil contractualclaims based on the U.S. obligations to pay. But arguablythey may have more than a contractual claim to the extent that U.S.law requires (other than by virtue of contractual obligation) the U.S.to pay. Current law provides with respect to Treasuries:(a) The faith of the United States Government is pledged to pay,in legal tender, principal and interest on the obligations of theGovernment issued under this chapter.(b) The Secretary of the Treasury shall pay interest due or accruedon the public debt. As the Secretary considers expedient,the Secretary may pay in advance interest on the public debt bya period of not more than one year, with or without a rebate ofinterest on the coupons. 125Subsection (a) does not directly require payment of principal, butthat requirement might be implicit in “pledged to pay.” Certainly,subsection (a) would authorize payment. Subsection (b) does directlyrequire payment. Should these provisions, which are directedat the U.S. government, also be considered a part of the U.S. obligationsto Treasury holders? Stated otherwise, are Treasury holderslegal beneficiaries of these provisions? If so, then if Alternative 2 wereimplemented by a law that partially abrogated these provisions, thatmight well question the public debt and violate the non-abrogationprincipal.125 31 U.S.C. § 3123(a), (b).