“While [the 14th Amendment] was undoubtedly inspired by the desire to put beyond question the obligations of the government issued during the Civil War, its language indicates a broader connotation,” the majority wrote in Perry v. U.S. “We regard it as confirmatory of a fundamental principle which applies as well to the government bonds in question, and to others duly authorized by the Congress as to those issued before the amendment was adopted. Nor can we perceive any reason for not considering the expression ‘the validity of the public debt’ as embracing whatever concerns the integrity of the public obligations.”
The law at issue, which tried to override the validity of a bond offering, “went beyond the congressional power,” the Court ruled, setting a precedent that has not been overturned.
Because the government borrows based on its full faith, Congress doesn’t have the authority to undermine that confidence by reneging on its obligation to its lenders, the ruling declared.
“To say that the Congress may withdraw or ignore that pledge is to assume that the Constitution contemplates a vain promise; a pledge having no other sanction than the pleasure and convenience of the pledgor,” reads the opinion, delivered by Chief Justice Charles Evans Hughes. “This Court has given no sanction to such a conception of the obligations of our government.”
(Source: The Huffington Post)
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