FINANCIAL TIMESObama faces legal bind if time runs out - FT.com
"If there is no increase in the debt ceiling by August 2, then the Treasury will not have enough money to meet all its commitments without borrowing more money, which it will not be able to do without breaking a wartime law from 1917 that created the debt ceiling.
But it is also bound by laws that tell it to make various payments, including the latest appropriations act passed by Congress in the spring, as well as an apparent instruction in the constitution to keep paying US debts.
The 14th amendment, adopted in 1868, says that “the validity of the public debt of the United States ... shall not be questioned”.
The purpose of the clause – originally formed to settle any doubt that the US would pay debts it incurred during the civil war – was tested in a Supreme Court case after the US left the gold standard to fight the Great Depression in 1933."