Treasury Secretary and former Fed Chair Janet Yellen says that the government will run out of debt ceiling tricks and could be forced to default on loans as soon as June 1, and as far as the Biden administration is concerned, the time to put this mess to bed is now here.
A standoff between House Republicans and President Biden over raising the nation’s borrowing limit has administration officials debating what to do if the government runs out of cash to pay its bills, including one option that previous administrations had deemed unthinkable.
That option is effectively a constitutional challenge to the debt limit. Under the theory, the government would be required by the 14th Amendment to continue issuing new debt to pay bondholders, Social Security recipients, government employees and others, even if Congress fails to lift the limit before the so-called X-date.
That theory rests on the 14th Amendment clause stating 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.”
Some legal scholars contend that language overrides the statutory borrowing limit, which currently caps federal debt at $31.4 trillion and requires congressional approval to raise or lift.
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.
It is unclear whether President Biden would support such a move, which would have serious ramifications for the economy and almost undoubtedly elicit legal challenges from Republicans. Continuing to issue debt in that situation would avoid an immediate disruption in consumer demand by maintaining government payments, but borrowing costs are likely to soar, at least temporarily.
Still, the debate is taking on new urgency as the United States inches closer to default. Treasury Secretary Janet L. Yellen warned on Monday that the government could run out of cash as soon as June 1 if the borrowing cap is not lifted.
Mr. Biden is set to meet with Speaker Kevin McCarthy of California at the White House on May 9 to discuss fiscal policy, along with other top congressional leaders from both parties. The president’s invitation was spurred by the accelerated warning of the arrival of the X-date.
But it remains unclear what type of compromise may be reached in time to avoid a default. House Republicans have refused to raise or suspend the debt ceiling unless Mr. Biden accepts spending cuts, fossil fuel supports and a repeal of Democratic climate policies, contained in a bill that narrowly cleared the chamber last week.
Mr. Biden has said Congress must raise the limit without conditions, though he has also said he is open to separate discussions about the nation’s fiscal path.
A White House spokesman declined to comment on Tuesday.
America has 30 days or the economy implodes thanks to GOP terrorists.
The only clue to the gambit was in the title of the otherwise obscure hodgepodge of a bill: “The Breaking the Gridlock Act.”
But the 45-page legislation, introduced without fanfare in January by a little-known Democrat, Representative Mark DeSaulnier of California, is part of a confidential, previously unreported, strategy Democrats have been plotting for months to quietly smooth the way for action by Congress to avert a devastating federal default if debt ceiling talks remain deadlocked.
With the possibility of a default now projected as soon as June 1, Democrats on Tuesday began taking steps to deploy the secret weapon they have been holding in reserve. They started the process of trying to force a debt-limit increase bill to the floor through a so-called discharge petition that could bypass Republican leaders who have refused to raise the ceiling unless President Biden agrees to spending cuts and policy changes.
“House Democrats are working to make sure we have all options at our disposal to avoid a default,” Representative Hakeem Jeffries, Democrat of New York and the minority leader, wrote in a letter he sent to colleagues on Tuesday. “The filing of a debt ceiling measure to be brought up on the discharge calendar preserves an important option. It is now time for MAGA Republicans to act in a bipartisan manner to pay America’s bills without extreme conditions.”
An emergency rule Democrats introduced on Tuesday, during a pro forma session held while the House is in recess, would start the clock on a process that would allow them to begin collecting signatures as soon as May 16 on such a petition, which can force action on a bill if a majority of members sign on. The open-ended rule would provide a vehicle to bring Mr. DeSaulnier’s bill to the floor and amend it with a Democratic proposal — which has yet to be written — to resolve the debt limit crisis.
The strategy is no silver bullet, and Democrats concede it is a long shot. Gathering enough signatures to force a bill to the floor would take at least five Republicans willing to cross party lines if all Democrats signed on, a threshold that Democrats concede will be difficult to reach. They have yet to settle on the debt ceiling proposal itself, and for the strategy to succeed, Democrats would likely need to negotiate with a handful of mainstream Republicans to settle on a measure they could accept.
Still, Democrats argue that the prospect of a successful effort could force House Republicans into a more acceptable deal. And Treasury Secretary Janet L. Yellen’s announcement on Monday that a potential default was only weeks away spurred Democratic leaders to act.
It's time to send in the bomb squad and disarm the debt doomsday device for good.