Conflict Between House Republicans and President Biden National borrowing limit Administration officials are debating what to do if the government runs out of cash to pay bills, including one option previous administrations considered unthinkable.
That option is effectively a constitutional challenge to the debt ceiling. In theory, the 14th Amendment would require the government to continue issuing new debt to pay bondholders, social security beneficiaries, public servants, and others. X-date.
or Theory is based on the 14th Amendment clause “The validity of the legally recognized public debt of the United States, including debt incurred for the payment of pensions and incentives for services to quell riots and insurrections, is not questioned,” it said.
Some legal scholars argue that the wording invalidates the statutory borrowing limit.
Economic and legal heads at the White House, Treasury Department and Justice Department have made the theory the subject of intense, unresolved debate in recent months, according to people familiar with the debate.
It is unclear whether President Biden would support such a move, which would have serious economic implications and would arguably draw legal challenges from Republicans. would avoid an immediate disruption to consumer demand by keeping government payments going, but borrowing costs could skyrocket, at least temporarily.
Yet the debate takes on new urgency as the US approaches default.Treasury Secretary Janet L. Yellen said Monday that the government Cash runs out on June 1st If the borrowing limit is not lifted.
Biden is scheduled to meet California House Speaker Kevin McCarthy at the White House on May 9 to discuss fiscal policy with other congressional leaders from both parties. The presidential invitation was fueled by accelerated warnings of the arrival of the X-date.
However, it remains unclear what kind of compromises will come in time to avoid defaults. House Republicans have refused to raise or suspend the debt ceiling unless Mr. Biden accepts spending cuts, fossil fuel bailouts and scrapping Democrats’ climate policies.
Biden has said Congress must raise the cap unconditionally, but he also said he is open to discussing the country’s fiscal policy on a case-by-case basis.
A White House spokesman declined to comment on Tuesday.
For more than a decade, a group of legal scholars and some liberal activists have pushed constitutional challenges to the borrowing limit. The previous administration has not taken it up. Lawyers from the White House and the Justice and Treasury Departments have never issued a formal opinion on the matter.
According to Garrett Epps, a constitutional scholar at the University of Oregon Law School, “The text of the Constitution prohibits the federal government from defaulting on its debts, even for a short period of time. wrote in november“If Congress decides to default, the argument must be made that the President has the power and duty to pay it without Congress’ authorization.
other jurist They say the restrictions are constitutional. Anita S. Krishna Kumar, a law professor at Georgetown University, said in her 2005 Law review article:
The president has repeatedly said it is Congress’ job to raise the limit to avoid an economically devastating default.
Senior officials, including Yellen and White House press secretary Carine Jean-Pierre, have avoided questions about whether they believe the constitution will force the government to continue borrowing to pay bills after the X-date. rice field.
ABC News asked Yellen if she would invoke the 14th Amendment to resolve the debt ceiling stalemate in 2021.
“It is the responsibility of Congress to show that the government is determined to pay the bills it has piling up,” she said. “We should not be in a position to have to consider whether the 14th Amendment applies.
government You have reached your borrowing limit On January 19, however, the financial authorities issued a so-called Temporary measures Keep paying bills on time. The measure, which is basically an accounting manipulation, is set to expire in the coming months, possibly by June 1st. If the Treasury stopped paying all bills, the government would default. Economists warn it could lead to a financial crisis and recession.
Progressive groups have urged Mr. Biden to take actions intended to bypass Congress on the debt ceiling and keep spending uninterrupted. 1 trillion dollar coin Deposit in the Federal Reserve. Internally, government officials have rejected most of them. Biden aides have publicly said the only way to avert the crisis is for Congress to act.
“I know I’m tired of saying this over and over again, but it’s true,” Jean-Pierre said Thursday after referring questions about the 14th Amendment to the Treasury Department. “It is their constitutional duty to get this done.”
But inside the administration, an open question is what the Treasury will do if Congress doesn’t extend the deadline. Many officials say the law is unclear, as is the constitution that gives Congress the power to tax and spend.
Officials who support invoking the 14th Amendment and continuing to issue new debt argue that the government will be exposed to lawsuits anyway. If you fail to continue paying your bills after the X-date, you may be sued in the event of default by the person who did not pay on time.
Other officials have argued that statutory borrowing limits are binding and that attempts to bypass them are likely to quickly lead to legal challenges and to the Supreme Court.
There is broad consensus on both sides of the argument that the move risks disrupting financial markets. Investors demand a premium to buy debt that can be voided by the courts, which could trigger a surge in short-term borrowing costs.
Moody’s Analytics economist Mark Zandy modeled such a situation earlier this year and found that if a court upheld a constitutional interpretation, there would be short-term economic damage but long-term benefits. discovered.
In March, Mr. Zandi wrote, “The tremendous uncertainty brought about by the constitutional crisis will drive financial markets down until the Supreme Court delivers its ruling.” Economic growth and job creation will temporarily slow, but “the economy will avoid recession and recover quickly,” he added.
Obama administration officials briefly considered and quickly discarded the constitutional theory in 2011 when Republicans refused to raise the cap unless the president agreed to cut spending. Treasury Department attorneys have not issued a formal opinion on the matter and have yet to do so this year, a Treasury Department official said this week.
but, letter In a 2011 New York Times article, then-Treasury General Counsel George W. Madison suggested Treasury officials disagreed with this theory. He directly challenged the claims of constitutional law professor Lawrence H. Tribe. opinion essay Treasury Secretary Timothy F. Geithner called for adoption of the 14th Amendment interpretation, which Mr. Tribe opposed.
“Like every Treasury secretary who has faced this issue,” Madison wrote, “Secretary Geithner has always viewed the debt ceiling as a binding legal constraint that only Congress can impose.” ing.