Article 1, Section 8, Clause 2: Borrowing Power

To borrow Money on the credit of the United States;

Congress is explicitly granted the power to borrow money, with the implied power (or why else the need?) to spend in excess of revenues. Such borrowing can take many forms, and in 1871, the Supreme Court declared that the issuance of paper currency, made legal tender by law, constitutes one form of borrowing. This is essentially the basis for the current system of fiat currency and the justification for the present national debt.

The need for Congress to have the power to borrow was clear to the Founders, who remembered the difficulty that the Continental Congress had in funding the War of Independence (“Not worth a Continental”) and the subsequent difficulties of funding national defense under the Articles of Confederation.

Naturally this power also has the potential for mischief, and we cannot help but regard trillions of dollars in new debt incurred in a time of economic recovery and reduced military spending as grievous mischief.  But this must be weighed against the mischief that can be caused by deflation, the collapse of the money supply, as occurred in the early years of the Great Depression. Constitutional rules must be clear, concise, and enforceable. We are pessimistic that a constitutional provision can be crafted that constrains the borrowing power to something we judge more prudent; here, as with many aspects of the Constitution, we must rely on the wisdom and prudence of the people’s representatives, which, in turn, ultimately means the wisdom and prudence of the voting public.