A US debt default would be unconstitutional—Bitcoin is the only way out

The following is a guest post by Kadan Stadelmann, CTO of Komodo Blockchain.

The 14th Amendment and the Debt Limit

The debt limit is the amount of money the United States government can borrow to pay 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 through January, 1 2025. The U.S. Treasury anticipates that sometime thereafter—say, somewhere between Jan. 14 and Jan. 23– the U.S. government would be required to take extraordinary measures to not default on its obligations. After all, default is not an option. 

In Section 4 of the 14th Amendment, the U.S. Constitution reads that “the validity of the public debt of the United States, authorized by law…shall not be questioned.” The Amendment was adopted in 1868.

A Congress during Reconstruction adopted Section 4 after The Union borrowed by issuing federal bonds as a means of financing the Civil War and pensions for army veterans who fought in the war. 

The Democratic Party at the time, run by former Confederate slaveholders, announced that it intended to deny the bond obligations if it gained control of Congress in the coming 1868 election. Congress adopted Section 4, and the states ratified it, to avoid a partisan default.

A debt limit would cap the funds that can be borrowed to meet the government’s financial obligations. The Fourteenth Amendment’s Public Debt Clause mandates that the federal government meet its financial obligations.  

The Public Debt Clause could be violated in the event that government actions undermine confidence about the validity of the public debt. This might happen when the government falls short of defaulting in or repudiating the public debt. A test to determine if considerable doubt arises might entail an analysis of the political and economic environment and the attitude of debt holders. 

Billionaire Elon Musk has shed light on spiraling U.S. debt issues. “We either fix this or go de facto bankrupt,” Musk posted to X.

Musk, who President-elect Donald Trump has tapped to head the Department of Government Efficiency (DOGE), has claimed that DOGE could cut $2 trillion from annual spending at a time when the national debt sits at $36 trillion. 

Lockdown measures led to increased stimulus measures and historic government spending, which sent inflation in 2022 to over 10%, forcing the Federal Reserve to hike interest rates.

Bitcoin Only Way Out

Since bankruptcy is not an option, Bitcoin is the only way out for the U.S. runaway debt situation. 

It appears as if Musk and Trump may agree. After all, Tesla holds approximately 10,000 bitcoin worth around $1 billion on its balance sheet. And in May, Trump said he could use bitcoin to pay off the debt with a “little crypto check.” 

Trump has promised a “strategic national bitcoin reserve” and predicted bitcoin would outgrow gold’s $16 trillion market capitalization. In December, Trump confirmed plans to establish a U.S. Bitcoin Reserve. 

“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,” Trump told CNBC. 

Sen. Cynthia Lummis (R-Wyo.) has even introduced a bill earlier this year— called the Boosting Innovation, Technology and Competitiveness Through Optimized Investment Nationwide (BITCOIN) Act. The Act proposes the U.S. purchase 1 million bitcoins over five years to decrease the $35 trillion U.S. national debt.

It is highly likely that a Bitcoin Reserve will happen within months of Trump taking office. The Lummis bill requires the U.S. purchase one million bitcoins, which is worth approximately $16 trillion at current prices. Then-presidential candidate Robert F Kennedy, Jr. proposed 4 million bitcoins, which is worth $56 trillion. 

The U.S. has the opportunity to make a financial play which could cover the national debt. The U.S. government can front run the entire world on Bitcoin, and secure its place as a global superpower. 

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