President Joe Biden and Treasury Secretary Janet Yellen have been sued by a union representing some 75,000 government employees demanding that the administration ignore the debt ceiling on grounds that the borrowing limit is unconstitutional.
The National Association of Government Employees (NAGE), which filed the lawsuit in a federal court in Boston on Monday, argues that the debt limit law adopted over a century ago goes against the Constitution’s separation of powers by forcing the president to cut spending already approved by Congress to prevent a default.
The 14th Amendment, which reads in part that the “validity” of the United States’ public debt “shall not be questioned,” has been interpreted to mean that the president must find money to pay national debts already incurred. The lawsuit argues that the debt limit law undermines the presidential duty to fulfill the country’s debt obligations as stipulated in the 14th Amendment, thereby violating the Constitution.
The union wants the debt limit law to be temporarily frozen while the case proceeds through the courts, which would allow the Treasury to issue new government securities and use the money to settle existing debts.
Currently, the debt cap stands at $31.4 trillion. It was reached in January, forcing Treasury to resort to “extraordinary measures” to keep settling obligations and avoid a default but the room to continue with these special actions is running out.
Yellen has warned that the so-called X-date, when the government can no longer borrow and must rely on incoming revenue to settle its obligations, could come as early as June 1 unless Congress agrees to lift the debt ceiling.
The lawsuit states that once the X-date is reached, Yellen would have to choose which federal obligations to pay from incoming tax revenues. Some analysts have argued that the government could prioritize payments on U.S. Treasuries, long considered one of the safest investments globally and a key reserve asset held by many of the world’s central banks.
However, the lawsuit argues that the Constitution grants spending power to Congress and so Biden and Yellen don’t have the authority to decide which payments to make once the scope for continuing to use the extraordinary accounting maneuvers runs out.
The 75,000 or so employees represented by the union stand to lose pay or be laid off if the debt ceiling is not raised and the Treasury prioritizes debt payments from incoming tax revenue.
“Nothing in the Constitution or any judicial decision interpreting the Constitution allows Congress to leave unchecked discretion to the President to exercise the spending power vested in the legislative branch by canceling, suspending, or refusing to carry out spending already approved by Congress,” the lawsuit states.
Invoking the 14th Amendment
The matter of the 14th Amendment being invoked to avert a debt crisis has been mostly unaddressed by the courts, and legal experts disagree whether it could be used in this way.The White House has looked at the possibility of invoking the 14th Amendment—basically using executive power to declare the debt ceiling unconstitutional—as a last-ditch measure to prevent a default in case debt ceiling negotiations between Democrats and Republicans fail to break the current impasse.
Faced with the growing threat that the X-date will arrive with no deal to issue new debt to settle prior obligations—and so a potential default—Biden has agreed to meet House Speaker Kevin McCarthy (R-Calif.) to discuss possible ways out of the deadlock.
Biden and the Democrats have insisted on legislation with no preconditions to raise the debt ceiling, while McCarthy and the Republicans have demanded spending cuts in exchange for their support to lift the borrowing cap.
The president was asked during an interview on MSNBC on May 5 whether he’s “prepared to invoke the 14th Amendment and blow through the debt ceiling,” with the interviewer saying there are members of Congress who might be willing to allow a government debt default to hurt the president politically.
“I’ve not gotten there yet,” Biden replied, adding that he’s prepared to negotiate with Republicans on a budget, but not on the GOP’s latest legislative proposal to raise the debt cap in exchange for spending cuts.
House Republicans have put forward a proposal that pairs raising the debt cap by $1.5 trillion with $4.5 trillion in spending cuts over a decade.
McCarthy has said that he hopes the GOP proposal would drive negotiations forward.
“Remember what this bill is. This bill is to get us to the negotiating table. It’s not the final provisions,” McCarthy told reporters on Capitol Hill in late April.
Biden has so far refused to budge, insisting on a clean bill to raise the debt cap, though his May 9 meeting with McCarthy could bring a breakthrough.
Risk of ‘Constitutional Crisis’
Yellen was asked about the possibility that Biden would invoke the 14th Amendment in the ABC interview on May 8, and she downplayed the idea that this would be a viable solution.“I’m still not exactly clear on whether it’s on the table or off the table,” ABC’s George Stephanopoulos said to Yellen. “Is it a ‘break glass in case of emergency’ option?”
Yellen replied by saying she doesn’t want to focus on the prospect of last-ditch emergency measures and reiterated her call for Congress to act.
“What’s important is that members of Congress recognize what their responsibility is, and avert what will surely be—regardless of how it’s handled, what option is used to handle it—an economic and financial catastrophe,” she said.
Stephanopoulos then said it seems Yellen isn’t taking the option off the table.
“There is no way to protect our financial system in our economy other than Congress doing its job and raising the debt ceiling and enabling us to pay our bills. And we should not get to the point where we need to consider whether the president can go on issuing debt,” Yellen said.
“This would be a constitutional crisis,” she added.
An attempt to override the congressionally mandated debt ceiling has never been tried, though it has been suggested as an emergency option in prior debt limit standoffs.
During the last debt ceiling impasse, in 2011, former President Bill Clinton said that if he were in the shoes of then-President Barack Obama, he would be prepared to invoke the 14th Amendment “without hesitation, and force the courts to stop me.”
Congress ultimately resolved that debt ceiling crisis by passing the Budget Control Act of 2011, which allowed the debt cap to be raised by $2.4 trillion in two phases.
