Treasury Secretary Janet Yellen said she will not rule out the possibility of declaring the debt ceiling unconstitutional if Congress cannot resolve its standoff over the debt ceiling, but said there are “no good options” on the table.
She was responding to a question about whether the Treasury could use the 14th Amendment to declare the debt ceiling unconstitutional. It reads, in part, that 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 the U.S. Constitution also gives Congress the power of the purse. If Yellen invoked the amendment, it would trigger a “constitutional crisis,” she told ABC News.
When pressed further by ABC’s George Stephanopoulos, a former Clinton White House press secretary, Yellen said that there was nothing the Biden administration could do to avoid an “economic catastrophe” if the 14th Amendment was invoked.
“I’m still not exactly clear on whether it’s on the table or off the table,” Stephanopoulos asked her. “Is it a ‘break glass in case of emergency’ option?”
Yellen responded by saying: “Look, I don’t want to consider emergency options. 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.”
Stephanopoulos then suggested to Yellen that “it sounds like you’re saying you don’t want to but you may have to.” She replied: “What to do if Congress fails to meet its responsibility, there is simply no good options. And the ones that you’ve listed are among the not good options.”
The idea of invoking the 14th Amendment was floated during an interview last week with President Joe Biden, and he suggested the option is on the table. Biden is slated to meet with House Speaker Kevin McCarthy (R-Calif.) this week on the debt ceiling as Yellen has warned the United States would default on its obligations on June 1.
What Could Happen
The federal government reached its $31.4 trillion debt limit in January. Since then, the Treasury Department has used “extraordinary measures” to keep funds going in the meantime, according to Yellen.The White House and some Democrats have insisted that a debt limit proposal should have no strings attached. However, McCarthy said that any deal needs to include federal spending cuts.
In recent months, Biden has said he will not negotiate over the debt ceiling increase, but he would discuss budget cuts after a new limit is passed. Congress has often paired debt-ceiling increases with other budget and spending measures.
Washington regularly sets a limit on federal borrowing. Currently, the ceiling is equal to roughly 120 percent of the country’s annual economic output. By July or August, Washington could have to stop borrowing altogether.
Under that scenario, shockwaves could ripple through global financial markets as investors question the value of U.S. bonds, which are seen as among the safest investments and serve as building blocks for the world’s financial system.
The House-passed bill would pare spending to 2022 levels and then cap growth at 1 percent a year, repeal some tax incentives for renewable energy, and stiffen work requirements for some anti-poverty programs.
“Since 1960, the debt ceiling has been raised 78 times, three times during the prior administration, always with bipartisan support,” Yellen said Sunday. “And it simply is unacceptable for Congress to threaten economic calamity for American households and the global financial system as the cost of raising the debt ceiling and getting the agreements on budget priorities.”
Yellen on Sunday reiterated that the United States will likely default by June 1, or about three weeks from when she gave the interview.
“This would be really the first time in the history of America that we would fail to make payments that are due,” Yellen said, echoing previous statements she’s made about the matter. “And whether it’s defaulting on interest payments that are due on the debt or payments due for Social Security recipients or to Medicare providers, we would simply not have enough cash to meet all of our obligations. And it’s widely agreed that financial and economic chaos would ensue.”
The Biden administration, she said, wants the debt ceiling bill to be separated from any budget compromise or spending cuts.
“I know [Biden] wants to set up a process in which spending priorities and levels are discussed and negotiated,” Yellen told “This Week.” “But these negotiations should not take place with a gun, really, to the head of the American people.”
A group of 43 Senate Republicans on Saturday said they oppose voting on a bill that only raises the U.S. debt ceiling without tackling spending, showing they could block such a plan by Democrats.
The legislation would require 60 votes to proceed in the 100-seat Senate. With only a 51–49 Democratic majority in the Senate, Schumer would need the support of at least nine Republicans to clear a 60-vote threshold to advance such legislation.
