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

240 A Comment on Professor Mooney’s Thought Experiment: Can U.S. Debt Be Restructured?clause could have been intended to apply to the United States itselfwhen, before the Fourteenth Amendment, there was no real need tohave a bankruptcy power to adjust the debts of the federal government.Even if our farsighted founding fathers were conscious of thepossibility that the United States might someday issue mounds ofits own debt, they almost certainly would have taken the view that,as a sovereign, the United States had all the power it needed to walkaway from its debts. Considered in this light, it seems, at least to thisbankruptcy lawyer, implausible that the bankruptcy clause of ArticleI of the Constitution could be construed to trump the subsequentlypassed Fourteenth Amendment.That leaves Professor Mooney’s other non-consensual restructuringmethod: simply defaulting. Does the Fourteenth Amendment prohibitthe United States from barring debtholders’ collection remediesif the United States defaults on its debts or otherwise defers payingthem? The argument that a mere default would not call into questionthe validity of the debt of the United States sounds plausible. Adebt default is not, on its face, an outright repudiation of the debt,and would seem not to question the debt’s validity. Certainly, a defaultby a corporate debtor does not call into question the validityof the company’s debt. The sovereign stands ready to hold thedebtor accountable by enforcing the debt. The fact that the debt isenforced by the sovereign through its courts is the very characteristicthat demonstrates the debt’s validity. The distinction between validityand enforceability breaks down, however, when it comes to debtsof the sovereign itself. Obligations of the sovereign can be enforcedonly at the sovereign’s own sufferance, so the validity of the debt andthe debt’s enforceability merge to become a single concept. Where anissuer can fail to pay its debts with impunity, can it really be said thatthe debts are “valid” in the first place? If Congress were to withdrawthe waiver of sovereign immunity with respect to U.S. public debt,thereby leaving creditors without any remedy if the U.S. defaulted,wouldn’t that action call into question the debt’s validity?In sum, it is hard for me to accept that the bankruptcy clause of theConstitution can do the work that Professor Mooney would like itto do or that the United States can, consistent with the Fourteenth