Borrowing Clause

Paper money and legal tender

The original draft of Art. I §8 cl. 2 empowered Congress "to borrow money and emit bills on the credit of the United States." The Committee of Detail and the 6 Aug. 1787 report both carried "and emit bills," but on 16 Aug. 1787 the Convention Journal records: "It was moved and seconded to strike the words 'and emit bills' out of the 8. clause of the 1 section of the 7 article which passed in the affirmative. [Ayes--9; noes--2.]" The deletion reflected the Convention's skepticism about paper money after the states' Confederation-era experience with depreciating bills of credit.

Despite this deletion, the Court held in Knox v. Lee (Legal Tender Cases), 79 U.S. 457 (1871), that Congress could issue treasury notes and make them legal tender in satisfaction of antecedent debts — relying in part on the Borrowing Clause along with the Necessary and Proper Clause. See Legal Tender Cases.

Anti-Federalist objections

Ratification-era critics attacked the borrowing power from two directions. Luther Martin, who had opposed striking "emit bills" at the Convention, argued in his Genuine Information (1788) that the deletion left the new government without a power "impossible to look forward into futurity" and might prove necessary in wartime: "By our original articles of confederation, the Congress have a power to borrow money and emit bills of credit on the credit of the United States . . . a majority of the convention . . . refused to trust this authority to a government, to which they were lavishing the most unlimited powers of taxation . . . and they erased that clause from the system."

Brutus, by contrast, attacked the borrowing power that remained as itself unlimited. In Brutus no. 8 (10 Jan. 1788), he warned: "The power to borrow money is general and unlimited, and the clause so often before referred to, authorises the passing any laws proper and necessary to carry this into execution." Coupled with the taxing and army powers, Brutus argued the government could "mortgage any or all the revenues of the union" and concluded "it is unwise and improvident to vest in the general government a power to borrow at discretion, without any limitation or restriction."

gap

No founding-era source in this batch defends the final, unqualified borrowing-power text against Brutus's unlimited-discretion objection point-for-point; Story's sovereignty rationale (above) is the closest doctrinal answer available in the wiki.

Binding obligation to pay

When Congress borrows money "on the credit of the United States," it creates a binding obligation to pay the debt as stipulated. Congress cannot thereafter unilaterally vary the terms of its own borrowing. In Perry v. United States, 294 U.S. 330 (1935), a federal law purporting to abrogate a gold-clause provision in government bonds was held to contravene this principle — though the creditor was denied a remedy because no actual damages were shown.

Originalist note

Story's Commentaries ground the binding-obligation principle applied in Perry directly in the founding-era text: the Borrowing Clause's guarantee is "on the credit of the United States," which Story read as incompatible with any later "restraining or controlling power" over the debt so created. Perry's holding tracks this original meaning even though the Court denied a remedy.