Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.
Why is it here? It has to do with the politics following the Civil War once the southern states were allowed to send representatives back to Congress. What consequences would follow?
The threat of debt default and its impact on national security was very much on the minds of those who drafted the Fourteenth Amendment to the Constitution. The historian Franklin Noll has explained how representatives of the former Confederate states, now back in Congress, were highly disinclined to tax their constituents to pay the debts of the Civil War’s victors – the Confederate debt was repudiated, only the Union debt was repaid. Consequently, the threat of default was a very real one in the immediate postwar period.
From the abstract of Noll's article:
From 1865 to 1870, a crisis atmosphere hovered around the issue of the massive public debt created during the recently concluded Civil War, leading, in part, to the passage of a Constitutional Amendment ensuring the “validity of the public debt.” However, the Civil War debt crisis was not a financial one, but a political one. The Republican and Democratic Parties took concerns over the public debt and magnified them into panics so that they could serve political ends — there was never any real danger that the United States would default on its debt for financial reasons. There were, in fact, three interrelated crises generated during the period: a repudiation crisis (grounded upon fears of the cancellation of the war debt), a repayment crisis (arising from calls to repay the debt in depreciated currency), and a refunding crisis (stemming from a concern of a run on the Treasury). The end of the Civil War debt crisis came only when there was no more political advantage to be gained from exploiting the issue of the public debt.
