Levers of Default: Can the President Unilaterally Alter the Terms of the National Debt?

The inviolability of America’s $30 trillion debt is a cornerstone of global markets and the U.S. economy. This Essay identifies a critical loophole: the President’s underappreciated power to dramatically change its legal structure—and argues that Congress should act to prevent a potential catastrophe.

The Essay details, for the first time in the literature, the arcane legal architecture underpinning America’s sovereign borrowings. Our analysis finds that although the President lacks authority to change the terms of outstanding debt retroactively, the President can accomplish similar goals by issuing new debt instruments that embed unprecedented powers. In surprisingly short order, a determined Executive could reconstitute much of the national debt to that Executive’s liking, and in the process, usurp congressional power over the purse. To safeguard the separation of powers and prevent any President from unilaterally engineering a global debt crisis, Congress should act now.

Introduction

U.S. Treasury securities (treasuries)¹—debt obligations of the American government—are vital to the global financial system.² Beyond financing government operations, they serve as a store of value and benchmark for asset prices.³ In this respect, treasuries are a bit like electricity: always in the background, but seldom top of mind until something goes wrong. A challenging fiscal backdrop—including a near-record debt-to-GDP ratio and the loss of America’s last “AAA” rating—has created an ominous dynamic as markets reassess U.S. creditworthiness.⁴

Now, the Trump administration is actively considering policies that risk pushing the United States over the edge. A widely circulated proposal, dubbed by market participants as the “Mar-a-Lago Accord,” argues for de facto restructuring America’s treasury obligations by pressuring creditors to accept less favorable terms—or even by taking presidential action unilaterally to change the terms of existing obligations.⁵

Contemplating previously unthinkable policies forces us to ask hitherto unasked legal questions: Can the President unilaterally alter the terms of treasuries—ex post or ex ante—or must the President go to Congress for authorization? Are there constitutional limitations on the power of either the President or Congress to alter such terms? What are the terms governing our national debt?

In this Essay, we illustrate the President’s unappreciated power to dramatically change the legal structure of our national debt and argue that Congress must act to constrain it. Appreciating the danger of the current situation begins with the arcane legal structure underpinning America’s sovereign borrowing, which we detail for the first time in the literature. Typically, government debt comes replete with exhaustive contracts detailing obligations and modification provisions. No such documents exist for U.S. treasuries. Rather, the terms of the agreement between creditors and the United States must be pieced together from a combination of legislation, transaction documentation, and market practice. How is that possible in a $30 trillion market?⁶ The seemingly illogical dynamic reflects a long-standing market belief: U.S. default is unthinkable.

That assumption may warrant questioning. We present two core findings. First, we illustrate how the President has extremely limited ability to change the terms of treasuries after issuance. Indeed, the U.S. Constitution probably prohibits the federal government from ex post alteration of treasuries, though the sole Supreme Court case on point is opaque.⁷ Second, and more problematically, our analysis shows that the Executive has largely unfettered discretion to set the terms of new bonds. The combination of short-maturity public debt coupled with underappreciated statutory provisions means that a determined Executive can reconstitute much of our outstanding national debt surprisingly quickly.

As first detailed in this Essay, this is an extremely potent power. Precisely because the President lacks the authority to alter the terms of already issued treasuries, any exercise of such a right—while technically legal—would be treated as a sovereign default and have unforeseeable (and possibly catastrophic) consequences for the U.S. economy and the global financial system. Congress must take this power away from the President.

This Essay proceeds as follows. Part I provides background on the legal structure of treasuries, a question that has thus far eluded scholarly attention. Part II analyzes the President’s power over the terms of already issued securities, concluding that although they cannot be altered ex post, it would be relatively easy for the Treasury to roll over most of the national debt into treasuries with new terms, effectively giving the President such authority. Part III argues that because an elective default has become a live policy option, Congress should remove the Treasury’s power to issue securities that would give additional powers to the President.

I. The Legal Framework for U.S. Government Debt

Within the sovereign debt world, U.S. treasuries are peculiar, with tens of trillions of dollars extended through remarkably informal agreements. Unlike the exhaustive documents that generally govern sovereign borrowing, the limited operative language for treasuries is sprinkled across regulations and Treasury announcements, all apparently seldom read by investors or lawyers.

A. Brief Legal Introduction to Sovereign Debt

The $90-trillion-plus global sovereign debt market⁸ is characterized by limited legal enforceability and the lack of a formal insolvency resolution process.⁹ When governments default, restructuring occurs through a combination of “soft law,” custom, and contractual mechanisms.¹⁰ To account for this, modern sovereign debt contracts generally provide an elaborate framework for altering contractual terms ex post and facilitating debt restructuring.¹¹ We can divide such term modifications between so-called (i) “reserve matters” concerning core economic terms that can only be amended by a supermajority of creditors,¹² and (ii) “non-reserve matters,” or less core issues that can be changed with a simple majority.¹³ The scope for unilateral adjustment is generally limited to rectifying “manifest error” with modifications “not materially prejudicial” to creditors.¹⁴

Sovereigns can issue debt under their own domestic law or that of foreign jurisdictions (typically New York or England).¹⁵ When things go south, that distinction becomes critical. Adjusting the terms of foreign law debt is hard, and necessitates negotiations with creditors.¹⁶ In contrast, a sovereign can change domestic law to unilaterally alter its obligations,¹⁷ as Greece did in 2012 with respect to domestic law creditors but could not do with foreign law bonds.¹⁸

The United States borrows exclusively in dollars under its own law, theoretically allowing a strategy not unlike that of Greece.¹⁹ This presents wholly uncharted territory because U.S. government debt is unique. Unlike the dollar-denominated bonds of other sovereigns, U.S. debt does not take the form of contracts governed by New York law. There is none of the elaborate documentation typically provided by foreign issuers, as treasuries are broadly exempt from U.S. securities law.²⁰

So, legally, what exactly is a treasury? Where does one find the terms of the contract between the United States and its creditors? And, critically, what does the contract say?

B. The “Contract” for Treasuries

In the beginning, there was Congress. Prior to the twentieth century, federal borrowing required Congress to authorize individual bond issues and define their terms.²¹ During World War I, Congress granted the Treasury discretion over the terms of bonds but limited its power with a “debt ceiling” controlled by Congress.²² Under current law, the Secretary of the Treasury has broad statutory authority regarding the mechanics and management of the national debt,²³ and with presidential approval “may borrow on the credit of the United States Government . . . and may issue bonds of the Government for the amounts borrowed . . . .”²⁴

Sovereign debt contracts generally consist of documents that detail core provisions including matters like declaring events of default, accelerating obligations, and exercising remedies.²⁵ For the United States, there are no such documents. Instead, the United States borrows under a Treasury document called the “Uniform Circular,”²⁶ which details Treasury auctions,²⁷ bid structure,²⁸ requirements for acceptance,²⁹ and computation of interest payments.³⁰ This reflects the historic assumption that U.S. debt is risk free.³¹

This structure allows the Treasury to bypass an ordinary underwriting process and instead sell treasuries through public auctions.³² A typical announcement includes a term sheet with the auction date, aggregate offering size, and may note certain non-standard elements, including terms for foreign government bidders.³³ The Uniform Circular and each respective auction announcement collectively “specify the terms and conditions of sale,” with the auction announcement controlling in the event of discrepancy.³⁴ There are no additional documents containing the terms governing U.S. treasuries.³⁵ This leaves wide open critical questions such as the treatment of restructuring, debt ceiling stand-offs, and government shutdowns, including information rights, payment grace periods, and procedures for declaring an event of default.³⁶

Although otherwise inconceivable for ordinary securities, this sparse contract is possible because of treasuries’ exemption from securities regulation.³⁷ Critically, however, because “the statutes, regulations, and circulars governing [treasuries] constitute the express contract between the parties,”³⁸ treasury-related disputes are contractual claims under federal law,³⁹ which creditors can pursue under the Tucker Act.⁴⁰

II. Unilaterally Restructuring the National Debt?

While most restructuring proposals contemplate a renegotiation of U.S. debt, any such negotiation would occur in the shadow of the President’s unilateral powers—if any—over the terms of already issued treasuries.⁴¹ With the background from Part I, it is possible to analyze the scope of presidential power over the legal structure of the national debt. The current treasuries’ contracts, federal legislation, and the U.S. Constitution limit the authority of the President to alter treasuries’ terms after they are issued. However, despite this limitation, the President could acquire such power without congressional action by issuing new treasuries with contractual provisions giving the President the power to alter terms ex post. Because of a shift in recent years toward shorter-maturity funding, the national debt could be rolled into treasuries with such terms relatively quickly.⁴²

A. Contractual Power to Alter Terms?

The foundational principle of contract law is “pacta sunt servanda” (agreements must be kept). Once a contract has been formed, parties cannot unilaterally alter terms unless authorized by the contract itself. Such provisions can exist in sovereign bond contracts,⁴³ de jure or de facto for domestic law obligations.⁴⁴ Do treasuries provide the United States the unilateral right to alter terms ex post issuance? As a matter of contract interpretation, we conclude that they do not—and that the United States cannot unilaterally change the terms of treasuries after they have been sold.⁴⁵

The Uniform Circular includes, in a section titled “Does the Treasury have any discretion in the auction process?,”⁴⁶ a single proviso referencing alteration of terms: “We reserve the right to modify the terms and conditions of new securities and to depart from the customary pattern of securities offerings at any time.”⁴⁷ No such provisions are included in auction announcements reviewed by the authors. The substance of that Uniform Circular proviso is twofold: terms for new securities and departure from “customary” auction “pattern[s].”⁴⁸

The second portion of the proviso—”to depart from the customary pattern of securities offerings at any time”⁴⁹—references treasury auction mechanics, consistent with the Uniform Circular’s focus and Treasury’s understandable need to adjust to market or policy changes. Consistent with that auction-focused reading, the immediately preceding language allows Treasury to “waive any provision of this part for any bidder or submitter; and . . . [c]hange the terms and conditions of an auction.”⁵⁰

The first portion of the proviso—“We reserve the right to modify the terms and conditions of new securities”—is plainly forward looking, with modification discretion regarding “new securities.”⁵¹ This is a considerable power—with the sole procedural check of public notice⁵²—potentially allowing the Treasury to issue treasuries with wholly different terms from prior vintages.⁵³ That same reading, however, strongly suggests that the Treasury lacks the contractual power to alter securities that have already been issued.

B. Regulatory Power to Alter Terms?

Can the Treasury promulgate rules independent of the Uniform Circular that would alter the terms of already issued treasuries? Does the grant of authority to the Secretary to manage the national debt include the authority to regulate the terms of such securities? Power over federal government finances is clearly within explicit congressional authority under Article I of the Constitution.⁵⁴ While the Contracts Clause of the Constitution limits the power of states to alter the obligations of contracts, the federal government is under no such constraint.⁵⁵ Subject to the constitutional limits discussed below, Congress can alter the obligations of contracts by statute.⁵⁶ Presumably, it can delegate this authority to the Secretary of the Treasury. Federal regulations regularly alter private contractual obligations ex post.⁵⁷ The question is whether Congress has, in fact, delegated this power. We think it has not.

Nowhere in the statutes governing the Treasury is there an explicit grant of such authority. The Secretary of the Treasury is given the explicit authority to alter the interest terms of Retirement Savings Bonds, a particular kind of debt security, after they are issued.⁵⁸ The fact that Congress felt the need to explicitly grant this authority suggests it did not believe that the Secretary already had it within the general discretionary grant regarding treasury terms.⁵⁹ In part, this is a straightforward application of the maxim of inclusio unius est exclusio alterius—the inclusion of one is the exclusion of another—and in part, it is an appeal to the plain language of the statute, which otherwise contains no grant of authority to alter the terms of treasuries ex post.

Nor can such a power be implied by the general authorization regarding treasury issuance. In a 2001 opinion, Justice Scalia wrote: “Congress . . . does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions—it does not, one might say, hide elephants in mouseholes.”⁶⁰ In West Virginia v. EPA, the Court expanded this argument into the so-called major questions doctrine, stating that “cases in which the ‘history and the breadth of the authority that [the agency] has asserted,’ and the ‘economic and political significance’ of that assertion, provide a ‘reason to hesitate before concluding that Congress’ meant to confer such authority.”⁶¹ As discussed below, restructuring the public debt of the United States would have enormous “economic and political significance.”⁶² Accordingly, any grant of power by Congress to restructure treasuries ex post would likely be subject to the clear statement rule of the major questions doctrine. With the narrow exception of Retirement Savings Bonds, there is no explicit grant of such authority in any federal statute.

C. Constitutional Limitations?

Even if Congress has granted the Treasury the power to alter the terms of treasuries ex post, it would be trying to grant a power that it lacks under the Constitution. Article I, Section 8 of the Constitution grants Congress the power “[t]o borrow Money on the credit of the United States,”⁶³ and Section 4 of the Fourteenth Amendment declares “[t]he validity of the public debt of the United States, authorized by law . . . shall not be questioned.”⁶⁴ These provisions likely bar the United States from altering the terms of its national debt unilaterally, but the sole U.S. Supreme Court decision to address the question, Perry v. United States,⁶⁵ is not a model of clarity.⁶⁶

Perry arose out of the 1933 decision of President Roosevelt to abandon the gold standard.⁶⁷ The New Deal Congress responded to Depression-era price deflation in 1933 by passing laws requiring that all privately held gold be sold to the government at a fixed price.⁶⁸ President Roosevelt then permitted the price of gold to appreciate against the dollar in international markets, in effect depreciating the value of the greenback.⁶⁹ Treasuries at the time, however, contained “gold clauses” that entitled the bearer to repayment in dollars equal to the pre-devaluation gold peg.⁷⁰ Rather than repay the now much higher nominal government debt, Congress adopted a joint resolution on June 5, 1933 declaring that the enforcement of gold clauses violated the public policy of the United States.⁷¹ The effect of the resolution was to excise the gold clause from all previously issued treasuries. Creditors immediately challenged this law as unconstitutional.⁷²

In a tortured opinion, Chief Justice Hughes held that the resolution was unconstitutional but that creditors had no right to a remedy against the government.⁷³ On the constitutional question, Hughes’s opinion relied on two arguments. First, he noted that the Constitution gave Congress the explicit power to borrow on the credit of the United States.⁷⁴ This power implied that the United States was bound by its contracts. He wrote:

By virtue of the power to borrow money “on the credit of the United States,” the Congress is authorized to pledge that credit as an assurance of payment as stipulated,—as the highest assurance the Government can give, its plighted faith. 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. This Court has given no sanction to such a conception of the obligations of our Government.⁷⁵

Hence, while Congress had the power to vitiate the gold clauses in private contracts, it lacked the power to vitiate those clauses in its own contracts.⁷⁶ As to Section 4 of the Fourteenth Amendment, the Court regarded the inviolability of government debt contracts as a fundamental principle.⁷⁷ “[We cannot] perceive any reason for not considering the expression ‘the validity of the public debt’ as embracing whatever concerns the integrity of the public obligations.”⁷⁸ All of this suggests that it is unconstitutional for the United States to unilaterally alter the terms of treasuries.

However, there are complications. The Court also held that the creditors were left without a remedy.⁷⁹ As a practical matter, Hughes was trying to avoid a confrontation with President Roosevelt.⁸⁰ The President was prepared to defy a negative ruling, and he had an address defending his defiance prepared should the Court rule against the government.⁸¹ As a legal matter, it is difficult to discern Hughes’s reasons for denying a remedy.

First, he announced: “The action is for breach of contract. As a remedy for breach, plaintiff can recover no more than the loss he has suffered and of which he may rightfully complain. He is not entitled to be enriched.”⁸² To the extent that Hughes claimed that the remedy for breach of contract is the actual, out-of-pocket damages flowing breach, he misstated the law of contracts. As the Restatement of Contracts—promulgated by the American Law Institute just two years prior to Perry—puts it, “[i]n awarding compensatory damages, the effort is made to put the injured party in as good a position as that in which he would have been put by full performance of the contract . . . .”⁸³

Alternatively, Hughes can be understood as reading the gold clause to require payment in specie.⁸⁴ It was admittedly unconstitutional for Congress to abrogate this clause directly. However, in addition to abrogating the gold clauses, Congress had limited the right of U.S. citizens to hold gold.⁸⁵ Accordingly, because “‘equivalent’ cannot mean more than the amount of money which the promised gold coin would be worth to the bondholder for the purposes for which it could legally be used”—sold directly back to the government at a fixed price—the creditors had no damages.⁸⁶

It is hard to see this reasoning as anything other than an artful dodge to avoid an explosive showdown between the Judiciary and the Executive. As a matter of contract interpretation, Hughes’s apparent assumption that the gold clauses required actual payment in gold coins with a particular face value and weight of gold cannot be accepted with a straight face. Market participants understood the gold clause as inflation protection, not as a right to payment in shiny metal discs of a certain weight issued by the Bureau of Engraving.⁸⁷ Hence, Hughes’s interpretation of the clause flew in the face of the well-established principle that standard usage controls the meaning of terms where “the usage exists in such transactions and each party knows of the usage or it is generally known by persons under similar circumstances.”⁸⁸

Gauging the legal import of Hughes’s obfuscations in the present is difficult. One might extract the following holding: the federal government lacks the legal power under the Constitution to alter the terms of its contracts ex post, but, provided that it is exercising some other valid constitutional power, it can limit the economic value of a disappointed creditor’s claim against the government. However, even if this heroic effort to render the remedial gobbledygook in Perry coherent is accepted, Congress would still need to act. Nothing in the opinion suggests that the President, acting through the Secretary of the Treasury, could impose such measures unilaterally. If anything, Perry stands for the opposite proposition, as all the actions taken in the case to alter the rights of creditors were taken by Congress, not by the President.⁸⁹

D. Debt Reconstitution with Presidential Powers

Although the President cannot alter the terms of current treasuries ex post, nothing stops the government from issuing new treasuries granting such power ex ante.⁹⁰ The Secretary of the Treasury has the statutory authority to unilaterally alter the terms of the Uniform Circular.⁹¹ Furthermore, the Treasury has maintained that it is exempt from the notice and comment process of the Administrative Procedure Act,⁹² notwithstanding it publishing notice of proposed changes to the Uniform Circular in the Federal Register as a matter of discretion.⁹³ Treasuries issued after any such amendments to the Uniform Circular would be subject to the new terms.

For example, as noted above in Section II.A., sovereign bond contracts often incorporate provisions facilitating ex post adjustment of obligations, most commonly through so-called “collective action clauses” (CACs).⁹⁴ Rather than tools for unilateral modification, CACs allow issuers to alter key financial terms ex post with the consent of a supermajority of creditors, in the process binding so-called “hold-outs.”⁹⁵

Going forward, the Treasury could issue new bonds allowing unilateral changes to economic terms. This could be accomplished by amending the Uniform Circular or by including such terms in future auction announcements under the existing Uniform Circular, whereby they would be incorporated into the contract with new creditors.⁹⁶ While distinct from regulatory actions that unilaterally alter existing debt, as a practical matter, this approach could achieve the same result surprisingly quickly.

Two key facets could be collectively leveraged to create a new debt stock giving the President unprecedented control, including the power to unilaterally alter terms post issuance. First, the stock of treasuries has a relatively short weighted-average maturity, which means that a significant portion of treasury debt already organically turns over each year.⁹⁷ For instance, about seventeen percent ($4.8 trillion) came due in the third quarter of 2025,⁹⁸ and an increasing emphasis on shorter term borrowing appears only poised to increase this dynamic.⁹⁹

Second, while the Treasury cannot change the terms of existing debt, it may be able to redeem and reissue obligations through a seldom noticed statutory call right. The relevant provision, Section 3103(b), provides that the Treasury may redeem with at least four months’ notice any outstanding notes, which constitute about fifty-two percent of total debt.¹⁰⁰ The plain statutory language, however, conflicts with modern market understanding¹⁰¹ as well as the Federal Reserve’s interpretation.¹⁰² A redemption of outstanding notes under Section 3103(b)¹⁰³ would almost certainly be legally and operationally contested. We believe that the modern market interpretation is not necessarily correct—and that this inherent tension illustrates yet another underappreciated seam underlying the legal structure of U.S. debt.¹⁰⁴

Notwithstanding the likely surprise to modern market participants, the seeming statutory oddity makes sense from the historical context. Until the late twentieth century, the underlying assumption of U.S. fiscal policy was that debts incurred during emergencies would be repaid as rapidly as possible.¹⁰⁵ Civil War-vintage treasuries—especially high-rate, long-dated treasuries—created substantial additional interest expense, as Congressionally-set terms precluded the Treasury from retiring the bonds early despite it having the financial capacity to do so.¹⁰⁶ The memory of this provided the context for debt management in America’s next major war.¹⁰⁷

During World War I, the Treasury was given the discretion to issue callable bonds.¹⁰⁸ In 1919, Congress and the Treasury disagreed on the interest rate that should be offered on new notes, with the Treasury insisting a relatively high rate was necessary. Congress, consistent with nineteenth century experience, was worried about locking in elevated war-time interest rates and insisted on a statutory call right that could be exercised if rates dropped.¹⁰⁹ This history also explains why the statutory call right doesn’t apply to longer-term treasury bonds, which were an innovation of the late twentieth century after Americans had come to accept the inevitability of a standing national debt.

III. Policy Implications

The analysis in Part II suggests that neither the Secretary of the Treasury nor Congress can alter already issued treasuries ex post. However, current law allows the Treasury to quickly reformulate the debt stock with new securities providing the President precisely such power. A President retaining, let alone threatening to use, such power would signal that debt modification—”default” in the eyes of financial markets—for treasuries has become a policy option for the United States. Congress must prevent this by limiting the Treasury’s statutory power to pursue a course of actions that collectively usurp Congress’s constitutional authority.

The crux of the “Mar-a-Lago Accord” argument is that the dollar’s market dominance is an unbearable burden, rather than the “exorbitant privilege” it has long been considered.¹¹⁰ According to this reasoning, a strong dollar places domestic producers at a disadvantage vis-à-vis foreign competitors, inhibiting their ability to provide middle-class manufacturing jobs. The proposed solution is to weaken the dollar by adjusting the terms of the U.S. national debt through various coordinated changes potentially including maturity extensions via century bond swaps or even deeper liability management. While not framed as such, a central feature of the contemplated measures would be paying creditors less than they believed they were promised ex ante—likely constituting a de facto restructuring and thus a default in the eyes of financial markets.¹¹¹

A. Historical Precedents

In its history, the federal government has had three default-adjacent episodes: first, following the War of 1812; second, the 1930s “Gold Clause Case” discussed above; and most recently, the so-called “mini-default” in 1979. The first most closely resembled a traditional default, as a combination of military expenses and lagging revenue left the Treasury unable to make some interest payments.¹¹² With respect to the “Gold Clause Cases,” scholars have found that Perry was followed by a decrease in the price of treasuries containing “gold clauses.”¹¹³

The 1979 “mini-default” concerned a weeks-long delay in interest payments owed to retail investors¹¹⁴ due to a back-office breakdown that coincided with a period of record retail demand.¹¹⁵ A class action alleging the delays as “unjust enrichment” at creditor expense was ultimately dismissed with prejudice following the government settling with over eighty percent of affected investors.¹¹⁶ The 1979 incident reflects the last time any Treasury-related payment was delayed—though its broader market significance remains contested.¹¹⁷

While these three prior default-adjacent episodes are difficult to characterize as devastating, a prospective “Mar-a-Lago” style default would likely be very different. Recent “debt ceiling” standoffs may be a better preview: in 2011, for instance, the S&P 500 plunged seventeen percent, reducing household wealth by $2.4 trillion.¹¹⁸ The implications of an actual (or even technical) default could prove far more severe, risking a full-scale global financial crisis with generational economic consequences.¹¹⁹

B. Envisioning Default

While specifics of any “Mar-a-Lago” transaction are hypothetical, the key idea is that any restructuring significant enough to pursue is likely to constitute a default—and a default is certain to have dramatic consequences. Unlike the corporate context, the question of when a sovereign has defaulted is surprisingly amorphous.¹²⁰ Normally the analysis begins with contractual “events of default,” but the scrawny documentation for treasuries contains no such provisions.¹²¹ As a fallback, commercial convention can look to influential third-parties including rating agencies, the Credit Derivatives Determinations Committees, and industry groups.¹²² Notwithstanding important differences in default criteria applied by such third-parties—and the potential for disparate outcomes—any alteration of economic terms of treasuries after they are issued would likely constitute a default as gauged by credit rating agencies and for credit default swap purposes.¹²³

A U.S. default would almost certainly create financial market turmoil and constrain the government’s access to capital, which it relies on to bridge a funding deficit that totaled $1.8 trillion in 2024.¹²⁴ The resulting fiscal crisis would force painful choices and deep cuts to critical social programs.¹²⁵

Beyond our shores, a U.S. default would have “very serious repercussions” for the world economy, the International Monetary Fund has warned.¹²⁶ Any sudden impairment of treasuries—widely-held by central banks and financial institutions worldwide—could erode critical balance sheets and financial system confidence, in turn driving de-dollarization.¹²⁷ That is critical because the global financial infrastructure—including banking, payment and clearing systems—is anchored by the U.S. dollar.¹²⁸ The dollar’s ubiquity is foundational to America’s “asymmetric economic power,” including sanctions used to advance geopolitical objectives.¹²⁹

C. Congress Should Act

While impossible to precisely forecast, the impact of a U.S. debt default—or a default-equivalent “reprofiling” that pays creditors less than they were promised ex ante—would be significant and unambiguously negative.¹³⁰ This presents an unacceptable risk for the American economy and global financial system built on treasuries as a benchmark asset and core foundation.

Since World War I, Congress has entrusted debt management to the sole discretion of the Treasury.¹³¹ Given that elective default has now become a live policy option in the United States, it is time for Congress to reconsider that decision.

The vulnerability we identify is straightforward. Because the Treasury has broad discretion to set the terms of new issuances, a determined President could gain backdoor control over the national debt by issuing new treasuries that contain an executive rewrite option (for example, language that permits maturity extensions or payment deferrals upon a presidential declaration). Those terms would not reach already issued bonds, but they would rapidly cover a large share of the debt stock as outstanding securities roll over, effectively letting the Executive decide tomorrow what Congress authorized today.

That outcome is problematic on both constitutional and policy grounds. Article I vests the borrowing power in Congress, and the Fourteenth Amendment’s Public Debt Clause underscores that the validity of public debt “shall not be questioned”¹³²—principles that are undermined if the Executive can reserve a unilateral right to change payment obligations later. Markets would not treat such a clause as a technicality: the credible prospect of unilateral term changes would be priced as default risk, raising Treasury yields and spilling quickly into mortgages, corporate credit, and the functioning of short-term funding markets.

Congress can address this vulnerability with a narrow fix: prohibit the Treasury from issuing any security that grants unilateral executive authority to alter core economic terms after issuance.¹³³ Pairing that with greater transparency—clear public notice and reporting for meaningful changes to the Uniform Circular and auction documentation—preserves U.S. debt-management flexibility while removing an Executive’s ability to pursue a default of choice.

Conclusion

We live in interesting times. Since the dollar’s emergence as the international reserve currency, default on the national debt has been unthinkable. Reflecting this, the limited legal architecture underlying U.S. bond contracts is predicated on the assumption that America will always pay its debts. As an economic matter, this should still be true. Notwithstanding fiscal challenges, including our largest post-war debt-to-GDP ratio, there is no plausible argument that the world’s most dynamic economy can’t repay its debts.

Recent policy discussions at the very center of U.S. power, however, have suggested voluntary default as a tool to pursue political objectives. We believe this to be dangerous and irresponsible. Current law limits the power of the President to implement such a policy ex post but leaves the Executive broad and heretofore unappreciated power regarding how U.S. bonds are structured ex ante. Congress should act to take this power away from the President.

Appendix 1: Total U.S. Debt Outstanding Summary Chart¹³⁴

Appendix 2: Composition of U.S. Treasury Securities¹³⁵

	Estimated Outstanding Amount as of Oct. 2025 (in trillions of dollars)136	Percent of Total Marketable Treasury Debt137	Maturity Window138
Treasury Bills	6.73	22%	1 year or less
Treasury Notes	15.9	52%	2 to 10 years
Treasury Bonds	5.2	17%	10+ years
Treasury Inflation-Protected Securities	2.14	7%	5, 10, and 30 years
Floating-Rate Notes	0.61	2%	2 years
Total	30.57	100%	—

1. The United States issues three main kinds of debt securities: bills (short-term, with maturities up to fifty-two weeks), notes (intermediate, with maturities up to ten years) and bonds (longer term, maturities up to thirty years). About Treasury Marketable Securities, TreasuryDirect, https://treasurydirect.gov/marketable-securities/ [https://perma.cc/FZ2A-93DF] (last visited Feb. 2, 2026). Unless otherwise noted, we will use the term “treasuries” to collectively reference all U.S. government debt securities and “Treasury” to reference the U.S. Department of the Treasury. ↩︎
2. See Yesha Yadav & Josh Younger, Central Clearing in the U.S. Treasury Market, 92 U. Chi. L. Rev. 546, 554 (2025) (“The market for U.S. Treasuries plays a foundational role in the economy and financial markets.”); Alexandra M. Tobova & Francis E. Warnock, Foreign Investors and U.S. Treasuries, Nat’l Bureau of Econ. Rsch. 1 (Working Paper No. 29313, 2022) (“U.S. Treasuries are arguably the most important securities in the world.”); Luis A. Aguilar, The Need to Revisit the Regulatory Framework of the U.S. Treasury Market, U.S. Sec. & Exch. Comm’n (July 14, 2015), https://www.sec.gov/newsroom/speeches-statements/need-revisit-regulatory-framework-us-treasury-market [https://perma.cc/Z4NG-KVGX] (“Treasuries have been woven into the very fabric of the global financial system”); Eva Su, Cong. Rsch. Serv., R48734, Treasury Market Disruptions and Policy Options 1 (2025) (“[T]he U.S. Treasury securities (Treasuries) market is considered one of the most important financial markets in the world.”). ↩︎
3. See Eugene Fama & Kenneth French, The Capital Asset Pricing Model: Theory and Evidence, 18 J. Econ. Persp. 25, 29-32 (2004) (applying the benchmarking utility of a U.S. Treasury bill with regard to the capital asset pricing model). ↩︎
4. See Davide Barbuscia, Moody’s Downgrade Intensifies Investor Worry About U.S. Fiscal Path, Reuters (May 19, 2025, at 4:45 AM ET), https://www.reuters.com/world/us/moodys-downgrade-intensifies-investor-worry-about-us-fiscal-path-2025-05-18/ [https://perma.cc/L78U-L83X]; Moody’s Ratings Downgrades United States Ratings to AA1 from AAA; Changes Outlook to Stable, Moody’s Ratings (May 16, 2025), https://ratings.moodys.com/ratings-news/443154 [https://perma.cc/583Q-7CKS]. ↩︎
5. See Stephen Miran, A User’s Guide to Restructuring the Global Trading System 27-31 (2024), https://www.hudsonbaycapital.com/documents/FG/hudsonbay/research/638199_A_Users_Guide_to_Restructuring_the_Global_Trading_System.pdf [https://perma.cc/U69N-V88V] (synthesizing the Mar-a-Lago Accord and exploring potential unilateral approaches under the International Emergency Economic Powers Act). For a summary of the current politics of the national debt, see Mary Childs, Debt Reckoning: Has the Treasury Market Started to Crack?, Harper’s Magazine (Aug. 2, 2025), https://harpers.org/archive/2025/08/debt-reckoning-mary-childs-treasury-market-bonds/ [https://perma.cc/T43Y-PLF3]; Kenneth S. Rogoff, America’s Coming Crash: Will Washington’s Debt Addiction Spark the Next Global Crisis?, 104 Foreign Affairs 172-75 (Aug. 19, 2025), https://www.foreignaffairs.com/united-states/americas-coming-crash-rogoff [https://perma.cc/Q8PV-QE9Q] (“Again and again, under both Democratic and Republican administrations, the government has used debt more vigorously than almost any other country to fight wars, global recessions, pandemics, and financial crises.”). ↩︎
6. See infra Appendix 1: Total U.S. Debt Outstanding Summary Chart. ↩︎
7. See infra Section II.C. ↩︎
8. Emre Tiftik, Khadija Mahmood & Raymond Aycock, Return of the Bond Vigilantes—Dangerous Dynamics in Debt Markets, IFF Global Debt Monitor 1 (Feb. 25, 2025), https://www.iif.com/portals/0/Files/content/Global%20Debt%20Monitor_
   February2025_vf.pdf [https://perma.cc/G6FV-TWDZ]. ↩︎
9. The myriad reasons for this are largely rooted in matters of sovereignty and jurisdiction. See Charles W. Mooney Jr., A Framework for a Formal Sovereign Debt Restructuring Mechanism: The Kiss Principle (Keep It Simple, Stupid) and Other Guiding Principles, 37 Mich. J. Int’l L. 57, 58 (2015) (crediting the unwillingness of International Monetary Fund (IMF) members to submit to the jurisdiction of an international tribunal for the IMF’s failure to create a formal sovereign debt restructuring mechanism). ↩︎
10. See Stephen Kim Park & Tim R Samples, Distrust, Disorder, and the New Governance of Sovereign Debt, 62 Harv. Int’l L.J., 175, 180-82 (2021) (observing that “[s]overeign debt is distinguished from corporate debt by its limited legal enforceability”). ↩︎
11. See, e.g., Deborah Zandstra, Jon Zonis, Simon James & Andrew Yianni, New ICMA Sovereign Collective Action and Pari, https://www.cliffordchance.com/content/dam/cliffordchance/briefings/2014/10/new-icma-sovereign-collective-action-and-pari-passu-clauses.pdf [https://perma.cc/572B-MT9K] (offering an example of such a framework through collective action clauses). ↩︎
12. Reserve matters substantively encompass, but are significantly broader than, the package of so-termed “sacred rights” associated with corporate credit. ↩︎
13. See Zandstra, supra note 11, at 2-3. ↩︎
14. See Int’l Cap. Mkt. Ass’n, Standard Aggregated Collective Action Clauses (“CACs”) for the Terms and Conditions of Sovereign Notes 9 (Aug. 2014), https://www.icmagroup.org/assets/documents/Resources/ICMA-standard-CACs-August-2014.pdf [https://perma.cc/CL6M-GQNG] (discussing “[m]anifest error” in part (h)). ↩︎
15. Domestic law debt is generally local currency-denominated; foreign law debt is often denominated in U.S. dollars or euros. See W. Mark C. Weidemaier & Mitu Gulati, The Relevance of Law to Sovereign Debt, 11 Ann. Rev. L. & Soc. Sci. 395, 399 (2015) (noting the “inability to borrow abroad in domestic currency” in sovereign debt markets). ↩︎
16. See Lee C. Buchheit, Guillaume Chabert, Chanda DeLong & Jeromin Zettelmeyer, The Restructuring Process, in Sovereign Debt 328, 328-29 (S. Ali Abbas, Alex Pienkowski, & Kenneth Rogoff eds., 2020) (describing how sovereign debt workouts are “painful—for the debtor country, its citizens, its creditors, and its official sector sponsors” because of “extraneous motives,” “asymmetric information,” and “creditor coordination”). ↩︎
17. See id. at 334 (“[T]he sovereign can unilaterally change the terms of domestic law-governed debt by making appropriate changes in its domestic law.”). ↩︎
18. See Patrick Bolton, Xuewen Fu, Mitu Gulati & Ugo Panizza, The 2012 Greek Retrofit and Borrowing Costs in the European Periphery, 1 J. L. & Empirical Analysis 1, 2 (2024) (recounting the Greek legislation). ↩︎
19. See id. at 1 (noting that Greece’s debt was in euros and governed by local law). ↩︎
20. See infra note 37 and accompanying text. ↩︎
21. See generally Tilford C. Gaines, Techniques of Treasury Debt Management (1962) (discussing the early history of U.S. debt management). ↩︎
22. Third Liberty Bond Act, Pub. L. No. 65–120, ch. 44, 40 Stat. 501 (1918). ↩︎
23. Treasury discretion includes matters like interest computation, offering size, and maturity tenors. 31 U.S.C. § 3121(a). ↩︎
24. Id. § 3102(a). ↩︎
25. See Int’l Cap. Mkt. Ass’n, supra note 14 (providing standard collective action clauses for sovereign debt contracts). ↩︎
26. The formal title of the document is the “Department of the Treasury Circular on the Sale and Issue of Marketable Book Entry Treasury Bills, Notes, and Bonds.” ↩︎
27. 31 C.F.R. §§ 356.0-356.5. ↩︎
28. Id. §§ 356.11-356.16. ↩︎
29. Id. §§ 356.20-356.25. ↩︎
30. 31 C.F.R. pt. 356, app. B.I (describing interest computation for more specialized securities such as inflation-protected bonds and floating-rate notes); see also id. at app. B.I.A.1 (noting semi-annual interest payments). ↩︎
31. See supra note 2. So-termed “settlement fails” (which occur when a Treasury trade fails to settle as scheduled) provide a parallel regarding high-impact contractual informality. For years, the market largely relied on convention—typically allowing a failing seller to deliver the next business day without imposing contractual damages (discipline mainly coming from the lost time value of money). Fed. Reserve Bank of N.Y., Guide to FR2004 Settlement Fails Data, https://www.newyorkfed.org/markets/pridealers_failsprimer.html [https://perma.cc/2MTX-M3YW] (last visited Feb. 22, 2026); Kenneth D. Garbade, Frank M. Keane, Lorie Logan, Amanda Stokes & Jennifer Wolgemuth, The Introduction of the TMPG Fails Charge for U.S. Treasury Securities, 16 Fed. Res. Bank N.Y. Econ. Pol’y Rev. 45 (2010). The 2008–09 crisis and associated market stress rendered that informal equilibrium untenable. The response was formalization through standardized market practice, including a “dynamic fails charge” which entitled the non-failing party to monetary compensation. U.S. Treasury Securities Fails Charge Trading Practice, Treasury Mkt. Pracs. Grp. (Mar. 31, 2009), https://www.newyorkfed.org/medialibrary/microsites/tmpg/files/pr033109.pdf [https://perma.cc/U6VL-SHR9]; Rajkamal Iyer & Marco Macchiavelli, The Systemic Nature of Settlement Fails, Bd. of Governors of the Fed. Reserve Sys.: FEDS Notes (July 3, 2017), https://doi.org/10.17016/2380-7172.1997 [https://perma.cc/PZ5P-CBBK]. ↩︎
32. Yield is determined through a reverse Dutch auction mechanism. U.S. Dep’t of the Treasury, How Auctions Work, https://treasurydirect.gov/auctions/how-auctions-work/ [https://perma.cc/57ZM-LT9G] (last visited Feb. 22, 2026); Kenneth D. Garbade & Jeffrey F. Ingber, The Treasury Auction Process: Objectives, Structure, and Recent Adaptations, 11 Current Issues in Econ. & Fin. 1, 3 (2005); U.S. Dep’t of the Treasury, Treasury’s Auction Rules (Nov. 15, 2024), https://treasurydirect.gov/files/laws-and-regulations/auction-regulations-uoc/treasury-auction-rules.pdf [https://perma.cc/BV8W-7Z4M]. ↩︎
33. Compare, e.g., U.S. Dep’t of the Treasury, Treasury February Quarterly Financing (Feb. 1, 2006), https://treasurydirect.fiscal.treasury.gov/instit/annceresult/press/preanre/2006/ofg020106.pdf [https://perma.cc/45C7-X66S] (announcing auction) with 31 C.F.R. § 356.5 (describing what types of securities the Treasury auctions) and Garbade & Ingber, supra note 32 (describing the Treasury auction process). ↩︎
34. 31 C.F.R. § 356.10. (“The auction announcement and this part, including the Appendices, specify the terms and conditions of sale. If anything in the auction announcement differs from this part, the auction announcement will control.”). ↩︎
35. One leading sovereign debt scholar has noted treasuries’ apparent lack of an explicit repayment commitment, in stark contrast to typical sovereign obligations. See Odd Lots, Mitu Gulati on Whether Trump Could Restructure U.S. Debt, at 7:19 (Apr. 18, 2025), https://omny.fm/shows/odd-lots/mitu-gulati-on-whether-trump-could-restructure-us-debt [https://perma.cc/GH8S-ADTD] (“[E]verybody who holds US treasuries should go and look at the contract terms . . . . I don’t think you’ll find anything” restricting Treasury from impairing creditor interests). That is not quite right, however, as in the 1980s Congress expressly codified a repayment commitment. See 31 U.S.C. § 3123(a) (“The faith of the United States Government is pledged to pay, in legal tender, principal and interest on the obligations of the Government issued under this chapter”); id. § 3123(b) (“The Secretary of the Treasury shall pay interest due or accrued on the public debt . . . “); see also Conor Clarke, The Debt Limit, 101 Wash. U.L. Rev. 1417, 1453 n.149 (2024) (“[W]hy this statutory promise returned is a mystery that appears unanswered in the legislative history, though it followed major conflicts over the debt limit in the early 1980s.”). ↩︎
36. See Davide Barbuscia & Anirban Sen, U.S. Government Shutdown May Prompt First-Ever Workaround for Inflation-Protected Bonds, Reuters (Oct. 29, 2025), https://www.reuters.com/business/us-government-shutdown-may-prompt-first-ever-workaround-inflation-protected-2025-10-29/ [https://perma.cc/EH8G-4M58] (reporting on the Department of the Treasury’s intent to use a fallback index in response to the Consumer Price Index not being published during a government shutdown). ↩︎
37. Yesha Yadav, The Failed Regulation of the U.S. Treasury Markets, 121 Colum. L. Rev. 1173, 1195 (2021) (“Treasuries generally enjoy ‘exempt’ status in securities regulations, meaning that issues of government debt do not need to be registered and are not subject to the SEC’s mandatory disclosure reporting regime.”). ↩︎
38. Brunwasser v. United States, No. CIV. A. 07-00385, 2008 WL 5216253, at *7 (W.D. Pa. Dec. 11, 2008); Wolak v. United States, 366 F. Supp. 1106, 1110–11 (D. Conn. 1973) (finding savings bonds to constitute contracts with the federal government); United States v. Dauphin Deposit Tr. Co., 50 F. Supp. 73, 75–76 (M.D. Pa. 1943) (finding that “[t]he Treasury regulations are within the authority given the Secretary of the Treasury by the Congress and have the force of Federal law,” because “the Federal Government is a party to the contract,” and “[i]t is based upon the exercise of the power delegated to Congress to borrow money on the credit of the United States”). ↩︎
39. See Est. of Watson v. Blumenthal, 586 F.2d 925, 929 (2d Cir. 1978) (“[T]he bonds are themselves contracts, and the regulations are incorporated into those contracts, accordingly, one may view the claim as essentially being ‘founded upon a contract’ and hence a matter exclusively for the Court of Claims.”). ↩︎
40. The Tucker Act functions as a limited sovereign immunity waiver and grants jurisdiction to certain federal courts over claims against the United States founded upon matters including contracts with the United States (which treasuries constitute). See 28 U.S.C. § 1346(a)(2) (granting original jurisdiction to the district courts and the U.S. Court of Federal Claims for certain claims against the United States); see also Asher Ang, No Faith and No Credit Is There Legal Recourse against the Federal Government Should a Default on Treasury Debt Occur?, 28 Widener L. Rev. 187, 195–96 (2022) (explaining that the Tucker Act waives sovereign immunity and provides federal court jurisdiction in actions on U.S. treasuries). ↩︎
41. Several scholars have examined a hypothetical U.S. debt restructuring, typically through a negotiated reprofiling of economic terms rather than examining Executive authority to alter bond terms ex post. See generally Edmund W. Kitch & Julia D. Mahoney, Restructuring United States Government Debt: Private Rights, Public Values, and the Constitution, 2019 Mich. State Law Rev. 1283 (2019); Steven L. Schwarcz, Rollover Risk: Ideating a U.S. Debt Default, 55 B.C. L. Rev. 1 (2014); Charles W. Mooney, United States Sovereign Debt: A Thought Experiment On Default and Restructuring, in Is U.S. Government Debt Different? 169 (Franklin Allen et al. eds., 2012). ↩︎
42. See infra Section II.D. ↩︎
43. See, e.g., Stephen Choi & Mitu Gulati, Innovation in Boilerplate Contracts: An Empirical Examination of Sovereign Bonds, 53 Emory L.J. 929, 961 n. 63 (2004) (noting that “[f]or Finland, the modification clause allowed the sovereign to modify any of the terms of the contract at its will”). ↩︎
44. W. Mark C. Weidemaier & Mitu Gulati, A People’s History of Collective Action Clauses, 54 Va. J. Int’l L. 51, 53 (2013) (discussing the standard structure of sovereign debt contracts). ↩︎
45. Notably, legislative provisions not referenced in the Circular or individual announcements allow for early redemption of treasury notes, the intermediate instrument (but not bills or bonds). 31 U.S.C. § 3103(b) (“The Government may redeem any part of a series of notes before maturity by giving at least 4 months’ notice but not more than one year’s notice.”). ↩︎
46. 31 C.F.R. § 356.33. ↩︎
47. Id. § 356.33(c) (emphasis added). ↩︎
48. Id. ↩︎
49. Id. ↩︎
50. Id. §§ 356.33(a)(3)-356.33(a)(4). ↩︎
51. See id. § 356.33(c) (emphasis added). ↩︎
52. Id. § 356.33(b) (“We will provide a public notice if we change any auction provision, term, or condition.”). Compare ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996) (Easterbrook, J.) (offers consisting of “terms to follow” can be accepted even if the offeree does not have access to the terms of the offer at the time of the contract). ↩︎
53. See infra Section II.D. ↩︎
54. See U.S. Const. art. I, § 8 (outlining Congress’s power over federal government finances). ↩︎
55. See Sinking-Fund Cases, 99 U.S. 700, 718-19 (1878) (acknowledging that the prohibition against the federal government depriving parties of property without due process is not included within the constitutional prohibition preventing states from passing laws impairing the obligation of contracts); see also Samuel R. Olken, Charles Evans Hughes and the Blaisdell Decision: A Historical Study of the Contract Clause, 72 Or. L. Rev. 513, 519 (1993) (discussing how the Contract Clause differed from the Northwest Ordinance in that it barred only state impairment of contract obligations). ↩︎
56. See Norman v. Baltimore & Ohio Railroad Co., 294 U.S. 240 (1935) (holding that Congress can alter the terms of corporate bonds ex post). An example of Congress’s exercise of such power is the federal bankruptcy code. See 11 U.S.C. §§ 101 et seq. ↩︎
57. See, e.g., 12 C.F.R. §§ 226.1 et seq. (so-called Regulation Z promulgated under the Truth in Lending Act, which applies to consumer credit contracts). ↩︎
58. 31 U.S.C. § 3107 (“With the approval of the President, the Secretary of the Treasury may increase by regulation the interest rate or investment yield on an offering of bonds issued under this chapter . . . .”). ↩︎
59. See Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 107 (2012) (“The expression of one thing implies the exclusion of others [expressio unius est exclusio alterius].”). ↩︎
60. Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 468 (2001). ↩︎
61. West Virginia v. EPA, 142 S. Ct. 2587, 2608 (2022) (internal citations omitted). ↩︎
62. See infra Section II.C. ↩︎
63. U.S. Const. art. I, § 8, cl. 2. ↩︎
64. U.S. Const. amend. XIV, § 4. ↩︎
65. 294 U.S. 330 (1935). ↩︎
66. See Henry M. Hart, Jr., The Gold Clause in United States Bonds, 48 Harv. L. Rev. 1057, 1057 (1935) (“Few more baffling pronouncements [than Perry v. United States], it is fair to say, have ever issued from the United States Supreme Court.”). While long little-studied by constitutional law scholars, the fiscal deterioration and debt ceiling standoffs of recent years have renewed interest in the case. See, e.g., Lawrence Rosenthal, The Debt Ceiling Is Constitutional, 26 N. Y. Univ. J. Legis. Pub. Pol’y 769, 777–78 (2023) (discussing Perry v. United States); Neil H. Buchanan & Michael C. Dorf, How to Choose the Least Unconstitutional Option: Lessons for the President (and Others) from the Debt Ceiling Standoff, 112 Colum. L. Rev. 1175, 1189–93 (2012) (same); Daniel Strickland, The Public Debt Clause Debate: Who Controls This Lost Section of the Fourteenth Amendment, 6 Charleston Law Rev. 775, 786–90 (2011) (same); Neil H. Buchanan & Michael C. Dorf, Borrowing by Any Other Name: Why Presidential “Spending Cuts” Would Still Exceed the Debt Ceiling, 114 Colum. L. Rev. Sidebar 44, 45 (2014) (same); Zachary K. Ostro, In the Debt We Trust: The Unconstitutionality of Defaulting on American Financial Obligations, and the Political Implications of Their Perpetual Validity, 51 Harv. J. Legis. 241, 256–59 (2014) (same); Michael Abramowicz, Beyond Balanced Budgets, Fourteenth Amendment Style, 33 Tulsa L. J. 561, 602–04 (1997) (same). ↩︎
67. See Gerard Magliocca, The Gold Clause Cases and Constitutional Necessity, 64 Fla. L. Rev. 1243, 1251-54 (2012) (tracing the legislative and executive actions diminishing the gold standard in the years leading up to Perry). See generally Sebastian Edwards, American Default: The Untold Story of FDR, the Supreme Court, and the Battle Over Gold (2018) (providing a history of the events that led President Roosevelt to abandon the gold standard and depreciate the dollar). ↩︎
68. Act of Mar. 9, 1933, Pub. L. No. 73-1, § 3, 48 Stat. 1, 2; Act of Jan. 30, 1934, Pub. L. No. 73-87, 48 Stat. 337, 337. ↩︎
69. In 1933, John Maynard Keynes archly observed, “[t]he recent gyrations of the dollar have looked to me more like a gold standard on the booze than the ideal managed currency of my dreams.” Sebastian Edwards, Keynes and the Dollar in 1933 1 Nat’l Bureau of Econ. Rsch. (Working Paper No. 23131, 2017), https://www.nber.org/papers/w23141 [https://perma.cc/Y5WJ-5TME]. ↩︎
70. See Magliocca, supra note 63, at 1250 (describing gold clauses). The clause was included in the Treasury circular setting out the terms of the debt. See Perry, 294 U.S. at 346-47 (stating that the bond at issue contained a gold clause and was issued pursuant to “Treasury Department circular No. 121 dated September 28, 1918”). ↩︎
71. H.R.J. Res. 192, 73d Cong., 48 Stat. 112, 113 (1933). ↩︎
72. See Edwards, supra note 67, at 124–27 (recounting the litigation leading to Perry v. United States). ↩︎
73. Perry, 294 U.S. at 354, 358 (1934). ↩︎
74. Id. at 351 (“In authorizing the Congress to borrow money, the Constitution empowers the Congress to fix the amount to be borrowed and the terms of payment.”). ↩︎
75. Id. ↩︎
76. See id. at 350-51, 353-54 (holding that the joint resolution of Congress was unconstitutional as to government contracts and distinguishing this from its authority to control the contracts of private parties). But see Norman v. Balt. & Ohio R.R. Co., 294 U.S. 240, 316 (1934) (upholding the joint resolution as applied to gold clauses in private contracts). ↩︎
77. See Perry, 294 U.S. at 354. ↩︎
78. Id. at 354. ↩︎
79. See id. at 357-58 (holding that the plaintiff was not entitled to damages because he was unable to show he sustained any loss). ↩︎
80. See Magliocca, supra note 67, at 1259–62, 1265-67 (discussing the political pressures the Court faced in 1934). ↩︎
81. See id. at 1247, 1275–78 (“In the event of an adverse decision by the Supreme Court, President Franklin D. Roosevelt was ready to give a speech stating that he would not comply because doing so would lead to an economic catastrophe.”). ↩︎
82. Perry, 294 U.S. at 354-55. ↩︎
83. Restatement (First) of Contracts § 329 cmt. a (Am. L. Inst. 1932). ↩︎
84. Henry Hart suggested that this was a plausible way of reading the opinion. Honesty, however, demands we admit that Hughes’s reasoning is ultimately obscure to us. See Hart, Jr., supra note 66, at 1071 (“We shall treat the clause, in other words, as a promise to pay, in specie, so many dollars in United States gold coin of the 1918 standard of weight and fineness.”). ↩︎
85. See Emergency Banking Act of 1933, Pub. L. No. 73-1, 48 Stat. 1 (allowing the President to regulate the use of gold during times of war); Gold Reserve Act of 1934, Pub. L. No. 73-87, 48 Stat. 337 (mandating that all gold held by the Federal Reserve be transferred to the Treasury). ↩︎
86. Perry, 294 U.S. at 357. ↩︎
87. See Russell L. Post & Charles H. Willard, The Power of Congress to Nullify Gold Clauses, 46 Harv. L. Rev. 1225, 1228–30 (1933) (recounting the treatment of gold clauses). At the time of Perry, the U.S. Supreme Court had long recognized that gold clauses were meant as an inflation hedge and could not be discharged by payment of the nominal amount of the bond. See Bronson v. Rodes, 74 U.S. 229, 250 (1868) (“Our conclusion, therefore, . . . is, that the bond under consideration was in legal import precisely what it was in the understanding of the parties, a valid obligation to be satisfied by a tender of actual payment according to its terms, and not by an offer of mere nominal payment.”). ↩︎
88. Restatement (First) of Contracts § 247(c) (Am. L. Inst. 1932). ↩︎
89. See Perry, 294 U.S. at 349-50 (discussing Congressional actions in the case). ↩︎
90. See 31 C.F.R § 365.0 (“Chapter 31 of Title 31 of the United States Code authorizes the Secretary of the Treasury to issue United States obligations, and to offer them for sale with the terms and conditions that the Secretary prescribes.”). Prospective marketability of such securities raises questions beyond the present scope. At the same time, while highly unusual, the structure has some parallels in respect of contingent securities, such as contingent capital bonds. A key difference, however, would be that the triggering mechanism herein could, presumably, be discretionary rather than contractual. See Note, Distress-Contingent Convertible Bonds: A Proposed Solution to the Excess Debt Problem, 104 Harv. L. Rev. 1857, 1857-58 (1991) (“[C]urrent securities laws hinder successful exchanges by magnifying collective action problems.”); see generally Robert C. Merton, The Financial System and Economic Performance, 4 J. Fin. Servs. Rsch. 263, 263-300 (1990) (outlining a functional perspective of the financial system). ↩︎
91. See 31 U.S.C. § 3102 (authorizing the Secretary, with the President’s approval, to “borrow on the credit” of the U.S. government “amounts necessary for expenditures authorized by law”). Per Uniform Circular 356, “Chapter 31 of Title 31 of the United States Code authorizes the Secretary of the Treasury to issue United States obligations, and to offer them for sale with the terms and conditions that the Secretary prescribes.” 31 C.F.R. § 356.0; 70 Fed. Reg. 29454, 29454 (May 23, 2005) (to be codified at 31 C.F.R. pt. 356) (“The Department of the Treasury [] is issuing in final form an amendment to 31 CFR part 356 [] by modifying its definitions of different types of bidders in Treasury marketable securities auctions.”). ↩︎
92. See 5 U.S.C. § 553(a)(2) (“This section applies, according to the provisions thereof, except to the extent that there is involved . . . a matter relating to . . . loans . . . or contracts.”). ↩︎
93. See, e.g., 69 Fed. Reg. 45202, 45202 (July 28, 2004) (to be codified at 31 C.F.R. pt. 356) (publishing the Uniform Circular and noting that proposed changes had previously been published but that “a notice of proposed rulemaking is not required”). ↩︎
94. Stephen J. Lubben, Protecting MA and PA: Bond Workouts and The Trust Indenture Act in the 21st Century, 44 Cardozo L. Rev. 81, 99 (2022) (noting that in U.S. restructurings, “Exchange offers are used because the TIA, and Section 316(b) in particular, blocks direct amendment of the more relevant terms of the bond.”). CAC provisions, however, are a feature of corporate debt in the United Kingdom. See Andrew G. Haldane, Adrian Penalver, Victoria Saporta & Hyun Song Shin, Optimal Collective Action Clause Thresholds 7 (Bank of England, Working Paper No. 249, 2004), https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2005/optimal-collective-action-clause-thresholds.pdf [https://perma.cc/8TWN-4GZ8] (“The potential advantages of collective action clauses (CACs) to facilitate the restructuring of debts have long been recognised and have been standard in English law bonds since the 19th century.”). ↩︎
95. Angela Delivorias, Eur. Par. Rsch. Serv., PE 637.974, Single-Limb Collective Action Clauses: A Short Introduction 3 (2019), https://www.europarl.europa.eu/RegData/etudes/BRIE/2019/637974/EPRS_BRI%282019%29637974_EN.pdf [https://perma.cc/YD8Q-3P6Z]. CACs became a regular feature of sovereign debt contracts after the spectacular success of Elliot Associates and other hold-out creditors who litigated against Argentina after its 2001 default. Martin Guzman, An Analysis of Argentina’s 2001 Default Resolution 16-18 (CIGI Papers No. 110, 2016), https://www.cigionline.org/static/documents/documents/CIGI%20Paper%20No.110WEB_0.pdf [https://perma.cc/X8TP-ULNG]. ↩︎
96. See 31 C.F.R. § 356.10 (“The auction announcement and this part, including the Appendices, specify the terms and conditions of sale. If anything in the auction announcement differs from this part, the auction announcement will control.”). ↩︎
97. Sam Goldfarb, Trump and Bessent Bring New Style to Managing America’s Debt, Wall St. J. (July 28, 2025), https://www.wsj.com/finance/investing/trump-and-bessent-bring-new-style-to-managing-americas-debt-5c2de0cc [https://perma.cc/KKL7-AL8N] (discussing Treasury Bessent’s policy emphasizing limited duration borrowings). ↩︎
98. Jack Salmon, The Quarterly Ledger: A Review of the Nation’s Balance Sheet: Q3 FY2025, The Unseen and the Unsaid (July 14, 2025), https://www.theunseenandtheunsaid.com/p/the-quarterly-ledger-a-review-of-5f9 [https://perma.cc/D9RE-GTCP]. ↩︎
99. As of October 2025, the composition of outstanding marketable treasuries included
    22% short-term bills, 17% long-term bonds, and 52% intermediate term notes (with the balance in floating rate and inflation protected securities). See What Types of Securities Does the Treasury Issue?, Peter G. Peterson Found. (Dec. 4, 2025), https://www.pgpf.org/article/how-does-the-treasury-issue-debt/ [https://perma.cc/KPK6-UBK2]. Marketable treasuries refer to debt held by the public (rather than intragovernmental obligations) and eligible for secondary market transactions. Id.; see also infra Appendix 2: Composition of U.S. Treasury Securities. ↩︎
100. See 31 U.S.C. § 3103(b) (“The Government may redeem any part of a series of notes before maturity by giving at least 4 months’ notice but not more than one year’s notice.”); see What Types of Securities, supra note 99. (“Treasury Notes have maturities ranging from two to 10 years . . . [they] represent[] about 52 percent of all marketable debt at the close of October 2025.”). ↩︎
101. See U.S. Dep’t of the Treasury, Office of Debt Mgmt., Treasury Presentation to TBAC: Fiscal Year 2024 Q2 Report 8 (2024), https://home.treasury.gov/system/files/221/CombinedChargesforArchivesQ22024.pdf [https://perma.cc/YB7E-79W9] (noting previous issuance of callable bonds and suggesting that the “Treasury could consider exploring” their use in the future). ↩︎
102. See Fed. Reserve Bank, Trading and Capital-Markets Activities Manual § 4020.1 (2011), https://www.federalreserve.gov/publications/files/trading.pdf [https://perma.cc/B8VQ-4EXL] [hereinafter Manual] (“Treasury notes are not callable.”). ↩︎
103. The central legal question can be reframed as whether Section 3103(b) applies to existing debt or simply gives Treasury the option to issue callable securities. ↩︎
104. Compare 31 U.S.C. § 3103(b) with Manual, supra note 102. The Federal Reserve does not cite authority or provide analysis regarding its position that treasury notes are not callable making it difficult to discern their understanding of Section 3103(b). Perhaps the Fed interprets this provision as granting the Treasury the authority to issue notes under 31 C.F.R. part 356 with an early redemption provision but such a “call” right exists only when that feature is actually included in the auction announcement/issuance terms for that security. However, because the Federal Reserve does not comment on Section 3103(b) in its Trading and Capital-Markets Activities Manual it is impossible to know. Regardless, we observe that the Fed’s reading is inconsistent with the plain statutory language—and flies in the face of the legislative history of the provision. See supra notes 99-104 and accompanying text. ↩︎
105. See generally Bill White, The Evolution of America’s Fiscal Constitution, in The Oxford Handbook of the U.S. Constitution 327 (Mark Tushnet, Mark A. Graber, & Sanford Levinson eds., 2015), https://doi.org/10.1093/oxfordhb/9780190245757.013.16 [https://perma.cc/H9WK-MQYZ] (observing that the Constitution was responding “to the burden of enormous debts,” and that “the presidencies of the Founding Fathers resolved to pay down old debts and incur new debts only for well-defined, extraordinary purposes”). ↩︎
106. See Tilford C. Gaines, Techniques of Treasury Debt Management 11-17 (1962) (discussing the repayment of Civil War era treasuries). ↩︎
107. See id. at 22-27 (discussing the financing of World War I and similarities and comparing it with debt management during the Civil War). ↩︎
108. See Second Liberty Bond Act, Sept. 24, 1917, ch. 56, 40 Stat. 288 (“The bonds herein authorized shall be in such form or forms and denominations or denominations and subject to such terms and conditions of issue, conversion, redemption, maturities . . . as the Secretary of the Treasury from time to time . . . may prescribe.”). ↩︎
109. See Victory Liberty Loan Act, § 18(a), Pub. L. No. 65-328, 40 Stat. 1309, 1310 (1919) (stating that notes “may be redeemable before maturity (at the option of the United States) in whole or in part, upon not more than one year’s nor less than four months’ notice”); 57 Cong. Rec. 4267 (1919) (statement of Rep. Claude Kitchen) (“The committee thought it was not unwise or unsafe to permit the Secretary of the Treasury to fix the interest rate on these short-term notes, especially in view of the fact that we have a redemption clause in the bill giving the Government the option to redeem within not less than four months[] . . . so that if the Secretary . . . sells these notes at an excessive rate of interest, then the Government could not be out that excess interest more than one year . . . .”). ↩︎
110. In simplified terms, the paper posits that the U.S. trade deficit is a symptom of structural over-demand for safe-haven dollar assets. See Miran, supra note 5, at 7. ↩︎
111. D. Andrew Austin, Cong. Rsch. Serv., R44704, Has the U.S. Government Ever “Defaulted”? 5 (2016) (“While expectations of payees and others would shape reactions to payment delays, intentions of payors generally matter less . . . . [G]ood intentions do not alter the character of [] default.”). ↩︎
112. Id. at 6-8. This ultimately facilitated creation of the second Bank of the United States and arguably long-run stronger fiscal management. Id. at 8. ↩︎
113. Randall S. Kroszner, Is It Better to Forgive Than to Receive? History Lessons Guide Policy Choices, Chi. Booth Rev. Econ. (Feb. 1, 2006), https://www.chicagobooth.edu/review/it-better-forgive-receive [https://perma.cc/D5EW-VYGQ] (“[G]overnment bonds with the gold clause, where there was little question of the ability to repay the nominal debt burden as well as the additional amounts that would have been due under the gold clause, fell in value.”). ↩︎
114. In late April and early May 1979, the Treasury delayed payment on roughly $122 million of Treasury bills maturing April  26, May  3, and May 10, affecting about 4,000 retail investors. The unpaid interest due to the delays was estimated at $125,000. Michael W. Sunner, Borrowing Through the U.S. Treasury’s ‘Fast Money Tree’ 35-37 (Author House, 2012); FACTBOX–The Day the U.S. (Technically) Defaulted, Reuters (July 11, 2011, at 5:55 PM ET), https://www.reuters.com/article/markets/us/factbox-the-day-the-us-technically-defaulted-idUSN1E76A0XA/ [https://perma.cc/C62R-LEVM]. ↩︎
115. Austin, supra note 111, at 12-14. Transfers to larger investors with holdings reflected in the Federal Reserve’s book entry system were unaffected. Id. at 13. Additionally, “[c]heck processing returned to normal by May 14, 1979, and payments for securities maturing on May 10, 1979, were mailed the following day.” See also Edward P. Foldessy, Treasury Hits Delays in Mailing Checks to the Holders of Its Maturing Securities, Wall St. J., May 9, 1979, at 8; Michael Quint, Credit Markets; Book-Entry Form for U.S. Debt, N.Y. Times, Feb. 23, 1985, at 32. ↩︎
116. See Austin, supra note 108, at 15. ↩︎
117. See Terry L. Zivney & Richard D. Marcus, The Day the United States Defaulted on Treasury Bills, 24 Fin. Rev. 475, 475 (1989) (positing that the mini-default increased short-term yields as much as sixty basis points, resulting in about $12 billion in added interest expense). But see Austin, supra note 107, at 20 (classifying the event as a “technical default” or payment delay—not a formal default—and generally downplaying market impact). ↩︎
118. U.S. Dep’t of the Treasury, The Potential Macroeconomic Effect of Debt Ceiling Brinkmanship 3 (Oct. 2013), https://home.treasury.gov/system/files/276/POTENTIAL-MACROECONOMIC-IMPACT-OF-DEBT-CEILING-BRINKMANSHIP.pdf [https://perma.cc/B5RE-N62V]; Fed. Open Mkt. Comm. & Bd. of Governors of the Fed. Reserve Sys., Transcript of the Federal Open Market Committee Conference Call on August 1, 2011 (Aug. 1, 2011), https://www.federalreserve.gov/monetarypolicy/files/FOMC20110801confcall.pdf [https://perma.cc/H8B3-6CG7]. ↩︎
119. See Wendy Edelberg, Benjamin Harris & Louise Sheiner, Assessing the Risks and Costs of the Rising U.S. Federal Debt, Brookings Inst. (Feb. 12, 2025), https://www.brookings.edu/articles/assessing-the-risks-and-costs-of-the-rising-us-federal-debt/ [https://perma.cc/LG3L-VPDJ] (identifying the threat of default and its impact on interest rates as a catalyst for a global financial crisis). ↩︎
120. Julianne Ams, Reza Baqir, Anna Gelpern & Christoph Trebesch, Sovereign Default, in Sovereign Debts: A Guide For Economists And Practitioners 275, 275–276 (S. Ali Abbas, Alex Pienkowski & Kenneth Rogoff eds., 2019) (“In practice, neither formal contractual nor substantive economic definitions are fully satisfactory.”); see also Lev E. Breydo, Russia’s Roulette: Sanctions, Strange Contracts & Sovereign Defaults 60 S.D. L. Rev. 107, 151-54 (2023) (discussing potential fall backs in determining a sovereign event of default). ↩︎
121. Austin, supra note 107, at 20 (“The legal document setting out terms for Treasury securities contained no default clause.”). ↩︎
122. See Ams et al., supra note 120, at 275-78 (identifying events that can indicate whether a sovereign is in default when the contractual definition of default is either absent or insufficient). ↩︎
123. Fitch, for instance, recognizes seven sovereign default events, including traditional payment defaults, currency redenomination, and distressed debt exchanges (which a Mar-a-Lago Accord transaction would likely constitute). See Common Framework Access Could Lead to Sovereign Debt Default, FitchRatings (Feb. 16, 2021, at 6:30 AM ET), https://www.fitchratings.com/research/sovereigns/common-framework-access-could-lead-to-sovereign-debt-default-16-02-2021 [https://perma.cc/LYB2-JM9A]. CDS DC determinations are binding on credit derivatives holders, but have limited impact beyond that market. See About Determinations Committees, Credit Derivatives Determinations Comms., https://www.cdsdeterminationscommittees.org [https://perma.cc/68A9-YHKC]. ↩︎
124. Based on total revenues of about $4.9 trillion against outlays of about $6.8 trillion. The Federal Budget in Fiscal Year 2024, Cong. Budget Off. (Mar. 2025), https://www.cbo.gov/system/files/2025-03/61181-Federal-Budget.pdf [https://perma.cc/PDS3-SNY3]. ↩︎
125. An instructive legal footnote is that Congress prepared legislation to manage priorities in a default, implicitly acknowledging the lack of clear executive authority. D. Andrew Austin, Cong. Rsch. Serv., R48209, A Binding Debt Limit: Background and Possible Consequences 56 (2024). ↩︎
126. David Lawder, IMF Says U.S. Default Would Have ‘Very Serious Repercussions’ on Global Economy, Reuters (May 11, 2023, at 12:36 PM ET), https://www.reuters.com/markets/us/imf-says-us-default-would-have-very-serious-repercussions-global-economy-2023-05-11/ [https://perma.cc/3BQZ-V7Y5]. ↩︎
127. See Mouhamadou Sy, A Critical Look at Dollar Dominance, Fin. & Dev. Mag. (Int’l Monetary Fund) 68 (2025) (reviewing Kenneth Rogoff, Our Dollar, Your Problem (2025)) (noting that the United States’ inability to issue debt during times of global economic distress could “undermine the dollar’s dominance”). ↩︎
128. See Robert Burgess, Opinion, Dethroning King Dollar Won’t Be an Easy Feat, Bloomberg (Mar. 3, 2022, at 5:00 AM ET), https://www.bloomberg.com/opinion/articles/2022-03-03/dethroning-the-dollar-as-the-world-s-reserve-currency-won-t-be-easy [https://perma.cc/RD56-43CS]; Joseph P. Joyce, The Dollar’s Primacy, Fin. & Dev. Mag. (Int’l Monetary Fund) 66 (2022), https://www.imf.org/en/Publications/fandd/issues/2022/03/book-review-dollar-primacy-joyce [https://perma.cc/F6BW-JB7M] reviewing Anthony Elson, The Global Currency Power of the US Dollar: Problems and Prospects (2021)) (describing the critical part the dollar plays in the global financial system). ↩︎
129. David S. Cohen & Zachary Goldman, Like It or Not, Unilateral Sanctions Are Here to Stay, 113 AJIL Unbound 146, 146 (2019). ↩︎
130. See infra Appendix 1: Total U.S. Debt Outstanding Summary Chart. ↩︎
131. See supra notes 21-24 and accompanying text. ↩︎
132. U.S. Const. amend. XIV, § 4. ↩︎
133. Particularly given current political dynamics, it is more likely than not that the Executive would need to sign any such legislation, presenting a practical hurdle that is a step beyond the scope of this analysis. ↩︎
134. Appendix 1 shows total U.S. debt outstanding between 2005 and 2025, divided between debt held by the public (marketable treasuries) and intragovernmental holdings, which refers to treasuries held by governmental organizations, such as the Social Security Trust. The analysis is based on three variables published in the Treasury’s Fiscal Data Debt to Penny dataset: (i) “debt_held_public_amt”; (ii) “intragov_hold_amt”; and (iii) “tot_pub_debt_out_amt,” which corresponds to the sum of the first two series. The data spans March 31, 2005, the first date for which both component series are available, through March 5, 2026. See Debt to the Penny, Treasury.gov: FiscalData, https://fiscaldata.treasury.gov/datasets/debt-to-the-penny/debt-to-the-penny [https://perma.cc/6JJ9-ZF2X] (last visited Mar. 9, 2026). ↩︎
135. Appendix 2 estimates the total amount of marketable treasury debt in each maturity category by multiplying (A) each maturity category’s respective percentage of total marketable treasury debt, reported in What Types of Securities, supra note 99, by (B) the total amount of outstanding marketable treasury debt (as of October 31, 2025), reported in Debt to the Penny, supra note 134. ↩︎
136. Debt to the Penny, supra note 134 (reporting approximately $30.57 trillion in debt held by the public as of October 31, 2025). ↩︎
137. What Types of Securities, supra note 99 (reporting the percentage breakdown of marketable Treasury securities by type). ↩︎
138. Id. ↩︎