Biden, Yellen Won’t Rule Out Declaring Debt Ceiling Unconstitutional
Biden, Yellen Won't Rule Out Declaring Debt Ceiling Unconstitutional
(Chris Kleponis - Pool via CNP // Newscome/RSSIL/Newscom )
Can the president declare the debt ceiling unconstitutional?
If Democrats and Republicans don't reach a resolution on raising the government's borrowing limit, the U.S. could have to start defaulting on some payments as soon as June. Rather than compromise with their conservative counterparts to resolve this situation, some Democrats want to declare the debt ceiling itself unconstitutional.
Unilaterally casting aside government borrowing caps like this would have profound and disastrous effects. But that's the sorry point we've reached in these negotiations.
In April, House Republicans passed a bill to raise the debt ceiling—which already stands at $31.4 trillion—in exchange for freezing spending at 2022 levels for a while and rolling back some Democratic initiatives. President Joe Biden and his allies would prefer to raise the debt limit without conditions.
To resolve the standstill, some progressives are now pinning their hopes on the 14th Amendment. It says "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."
"Some legal scholars contend that language overrides the statutory borrowing limit," The New York Times reported last week. And some in the Biden administration are buying this argument:
Top economic and legal officials at the White House, the Treasury Department and the Justice Department have made that theory a subject of intense and unresolved debate in recent months, according to several people familiar with the discussions.
On Friday, Biden said he wasn't ready to invoke the 14th Amendment to avoid disruption in government payments. But he didn't rule it out entirely, instead saying that he had "not gotten there yet" (emphasis mine).
On This Week With George Stephanopoulos yesterday, Treasury Secretary Janet Yellen would not say outright that this option was off the table. "We should not get to the point where we need to consider whether the president can go on issuing debt. This would be a constitutional crisis," Yellen said when first asked.
"I don't want to consider emergency options," she added when pressed. "What's important is that members of Congress recognize what their responsibility is and avert…an economic and financial catastrophe."
The idea that the debt limit might be unconstitutional isn't new—"a group of legal scholars and some liberal activists have pushed the constitutional challenge to the borrowing limit for more than a decade," the Times points out. But "no previous administration has taken it up. Lawyers at the White House and the Justice and Treasury Departments have never issued formal opinions on the question. And legal scholars disagree about the constitutionality of such a move."
If such a move were allowed, the federal government could keep borrowing indiscriminately, which would eventually lead to all sorts of financial troubles.
"No matter what the merits of the debate are, Biden officials fear that investors would demand much higher interest rates to buy government debt that the courts could throw out, since prospects for repayment would be unclear," writes Jeff Stein at The Washington Post:
That could lead federal borrowing costs to spike, as well as drive up rates for other loans, and it could still lead to the same broader panic in financial markets that it is intended to avoid.
"You have to worry about the interest rates, the market reaction, the effect on financial markets that rely on Treasurys. There's no way to avoid potentially significant economic damage given the debate that would ensue," said David Kamin, who served as deputy director of the White House National Economic Council earlier in the Biden administration.
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