The following is a guest post from Kadan Stadelmann, CTO of Komodo Blockchain.
The 14th Amendment and the Debt Limit
The debt limit is the amount of money the U.S. government can borrow to meet its existing legal obligations. These include Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds and more.
In June 2023, the Fiscal Responsibility Act of 2023 suspended the debt limit until January 1, 2025. The U.S. Department of the Treasury anticipates that some time afterwards – for example sometime between January 14 and 23 – the US government would have to take extraordinary measures to avoid defaulting on its obligations. After all, standard is not an option.
In Section 4 of the 14th Amendment, the U.S. Constitution states that “the validity of the public debt of the United States, authorized by law…shall not be questioned.” The amendment was passed in 1868.
A Congress during Reconstruction passed Section 4 after the Union borrowed money by issuing federal bonds as a means to finance the Civil War and pensions for Army veterans who had fought in the war.
The then Democratic Party, led by former Southern slave owners, announced that it intended to deny the bond obligations if it gained control of Congress in the upcoming 1868 elections. Congress passed Section 4, and the states ratified it, to prevent partisan default.
A debt limit would limit the amount of money that can be borrowed to meet the government’s financial obligations. The Public Debt Clause of the Fourteenth Amendment requires the federal government to meet its financial obligations.
The national debt clause could be violated in the event that government action undermines confidence in the validity of the national debt. This could happen if the government fails to service or repay the national debt. A test to determine whether significant doubt arises could involve an analysis of the political and economic environment and the attitudes of creditors.
Billionaire Elon Musk has shed light on America’s spiraling debt problem. “We will solve this or go de facto bankrupt,” Musk said posted to X.
Musk, who was appointed by newly elected President Donald Trump to head the Department of Government Efficiency (DOGE), has claimed that DOGE could save $2 trillion in annual spending at a time when the national debt is $36 trillion.
Lockdown measures led to more stimulus and historic government spending, pushing inflation above 10% in 2022, forcing the Federal Reserve to raise interest rates.
Bitcoin only way out
Since bankruptcy is not an option, Bitcoin is the only way out of America’s runaway debt situation.
It seems Musk and Trump agree. After all, Tesla has about 10,000 bitcoin worth about $1 billion on its balance sheet. And in May, Trump said he could use bitcoin to pay off pay off the debt with a ‘small crypto check’.
Trump has promised a “strategic national bitcoin reserve” and predicted that bitcoin would outgrow gold’s $16 trillion market cap. In December, Trump confirmed plans to establish a US Bitcoin Reserve.
“We’re going to do something great with crypto because we don’t want China or anyone else, but others are embracing it and we want to lead the way,” Trump said. told CNBC.
In fact, Senator Cynthia Lummis (R-Wyo.) introduced a bill earlier this year called the Boosting Innovation, Technology and Competitiveness Through Optimized Investment Nationwide (BITCOIN) Act. The law proposes that the US buy 1 million bitcoins over five years to reduce the US national debt of $35 trillion.
It is very likely that a Bitcoin Reserve will happen within months of Trump taking office. Lummis’ bill requires the US to buy one million bitcoins, which at current prices is worth about $16 trillion. Then-presidential candidate Robert F Kennedy Jr. proposed 4 million bitcoins, which is worth $56 trillion.
The US has the opportunity to take a financial action that could cover the national debt. The US government can run the entire world on Bitcoin and secure its place as a global superpower.
