The 14th Amendment and the Debt Ceiling
The debt ceiling represents the maximum amount of money that the U.S. government is permitted to borrow in order to meet its existing financial commitments. These obligations encompass various expenditures such as Social Security and Medicare benefits, military salaries, interest payments on the national debt, tax refunds, among others. In June 2023, the Fiscal Responsibility Act of 2023 suspended the debt ceiling until January 1, 2025. Following this period, the Treasury Department estimates that it will need to implement extraordinary measures between January 14 and January 23 to prevent a default on these obligations, as defaulting is not an acceptable option.
According to Section 4 of the 14th Amendment of the U.S. Constitution, adopted in 1868, “the validity of the public debt of the United States, authorized by law…shall not be questioned.” This section was established during the Reconstruction era when the Union had to issue federal bonds to finance the Civil War and provide pensions for veterans. During this time, the Democratic Party, led by former Confederate slaveholders, threatened to reject these bond obligations if they gained control of Congress in the 1868 elections. To prevent a partisan default, Congress enacted Section 4, which was subsequently ratified by the states. A debt ceiling effectively limits the government’s ability to borrow necessary funds to fulfill its financial obligations, while the Public Debt Clause of the 14th Amendment insists that the government must honor these commitments.
Violating the Public Debt Clause could occur if government actions lead to doubts about the legitimacy of the public debt. This situation could arise if the government appears to be on the verge of defaulting or disavowing its debt. Evaluating whether significant uncertainty exists may involve analyzing the political and economic climate, as well as the sentiments of debt holders. Billionaire entrepreneur Elon Musk has recently spotlighted the escalating U.S. debt challenges, asserting via X that, “We either fix this or go de facto bankrupt.” Musk, who has been appointed by President-elect Donald Trump to oversee the Department of Government Efficiency (DOGE), has suggested that DOGE could potentially reduce annual spending by $2 trillion, particularly as the national debt has reached a staggering $36 trillion.
Bitcoin as the Solution
With bankruptcy off the table, Bitcoin emerges as a potential solution to the U.S. escalating debt crisis. This perspective seems to resonate with both Musk and Trump, as Tesla currently holds around 10,000 bitcoins valued at approximately $1 billion. In May, Trump remarked that he could utilize Bitcoin to settle the debt with a “little crypto check.” He has previously pledged to create a “strategic national Bitcoin reserve” and forecasted that Bitcoin could surpass gold’s market capitalization of $16 trillion. In December, Trump reaffirmed his intention to establish a U.S. Bitcoin Reserve, stating, “We’re gonna do something great with crypto because we don’t want China, or anybody else … but others are embracing it, and we want to be ahead.”
Additionally, Sen. Cynthia Lummis (R-Wyo.) has introduced legislation earlier this year known as the Boosting Innovation, Technology and Competitiveness Through Optimized Investment Nationwide (BITCOIN) Act. This bill proposes that the U.S. government acquires 1 million bitcoins over a five-year period to alleviate the $35 trillion national debt. The establishment of a Bitcoin Reserve could potentially occur shortly after Trump assumes office. The Lummis bill necessitates the U.S. to purchase 1 million bitcoins, which would equate to around $16 trillion at current market rates. In contrast, then-presidential candidate Robert F. Kennedy Jr. suggested an even larger acquisition of 4 million bitcoins, valued at $56 trillion.
The United States has a unique opportunity to execute a financial strategy that could effectively address the national debt. By positioning itself as a frontrunner in Bitcoin adoption, the U.S. could solidify its status as a global superpower.
