I’m a law nerd. I’d have to be to do this all of the time. So a delight for somebody like me is to come across an obscure constitutional provision that was important in a particular case. This recently happened as I was writing up my paper on the Gold Clause Cases. The argument of the bondholder in Perry v. United States was that the Federal Government could not substantially repudiate (or devalue) its obligations by reducing the gold content of the dollar and applying that change to Treasury bonds issued prior to the revision. In support of that argument, they cited, among other things, Section 4 of the Fourteenth Amendment. I submit that even most constitutional experts don’t know what Section 4 says. Here it is:
“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” [The rest of Section 4 says that neither the United States or any state shall pay Confederate debts or compensation to slaveholders.]
The bondholder in Perry claimed that the substantial devaluation of Treasury bonds was questioning the validity of the public debt contrary to Section 4′s command. What’s more, the Supreme Court agreed. Chief Justice Hughes’ opinion for the Court stated that Section 4 was “confirmatory of a fundamental principle” about the “integrity of the public obligations.” Of course, the Chief Justice then turned around and said the bondholder had no remedy for this constitutional violation (on pretty shaky grounds). And, as far as I know, that was the last time anyone cited Section 4 to the Court. Until, of course, somebody decides to litigate the deliberate creation of inflation by a future Congress or Federal Reserve.
UPDATE: I’ll be offline for the next week-and-a-half for Fall Break.