On Monday evening, President Joe Biden and the Speaker of the House, Kevin McCarthy, met at the White House to resume negotiations about raising the nation’s statutory debt ceiling. Although both made hopeful noises after the meeting, it seems quite possible that the standoff will continue right up until June 1st—nine days from now—the “X-Date” on which, according to Treasury Secretary Janet Yellen, the U.S. government may no longer be able to meet all its financial obligations.
Evidently, the two sides remain far apart. McCarthy and his colleagues are demanding big spending cuts and tighter work requirements for some social programs, and, according to some reports, they have now escalated their demands. Over the weekend, Politico reported that the G.O.P. negotiators had rejected a White House offer to freeze domestic spending at this year’s levels and demanded work requirements for recipients of the Supplemental Nutrition Assistance Program, or SNAP—formerly known as food stamps—that are “more rigid than those they originally proposed.” After Monday’s White House meeting, the Post reported that McCarthy “appeared to double down” on his party’s calls for stricter requirements.
The Republicans’ hard line has prompted progressive Democrats in both the Senate and the House of Representatives to demand that the White House prepare to invoke the Fourteenth Amendment of the Constitution as a way to circumvent the debt ceiling. If the Administration took this route, the Treasury Department would continue to sell new bonds after the X-Date, the proceeds of which would be used to make sure that the federal government continued to pay all its bills. “We cannot reach a budget agreement that increases the suffering of millions of Americans who are already living in desperation,” a group of eleven Democratic senators, including Bernie Sanders, Elizabeth Warren, and Jeff Merkley, wrote to Biden last Thursday. Some progressives have also argued that considering the Fourteenth Amendment option could give the White House more leverage in talks with Republicans, whom they accuse—with ample cause—of not negotiating in good faith.
Biden’s comments on this subject have been a bit delphic. At a G7 summit in Japan over the weekend, he was asked what assurances he had offered America’s allies that the United States wouldn’t default on its debts. He said he couldn’t guarantee that the Republicans wouldn’t force a default by “doing something outrageous,” and added, “I’m looking at the Fourteenth Amendment, as to whether or not we have the authority. I think we have the authority. The question is: could it be done and invoked in time? . . . That’s a question that I think is unresolved.”
Based on the President’s public statements and conversations with people close to the White House, it’s clear that the Biden Administration is carefully examining all its options to avoid a technical default should there be no agreement by the X-Date. Invoking the Fourteenth Amendment is one of these options, but there are also others, including prioritizing certain federal payments, particularly interest and principal payments on the national debt, and raising more revenue by replacing existing Treasury bonds with “premium bonds” that have a higher yield and, therefore, a higher market value. In his Sunday press conference, Biden didn’t mention the other options, but, by bringing up the question of whether the Fourteenth Amendment could be “invoked in time,” he alluded to a larger skepticism within his Administration about whether it’s really a viable option.
If the Administration were to invoke the Fourteenth Amendment, its legal justification would presumably rely on Section 4, which says, in part: “The validity of the public debt of the United States, authorized by law . . . shall not be questioned.” Some legal experts, including Laurence Tribe, a well-known emeritus Harvard Law professor, argue that this language amounts to a constitutional guarantee that the U.S. government will always repay its debts in full. However, even Tribe has acknowledged that if Biden were to use this strategy to raise the debt ceiling, Republicans would immediately mount a legal challenge, most likely by citing another part of the Constitution—Article I, Section 8—that grants Congress, rather than the executive, the power to “borrow Money on the credit of the United States.” Such a challenge “would put any court in a terrible bind because it would have to choose among options none of which would leave all the laws of the U.S. intact,” Tribe said, in an interview with the Harvard Gazette.
An obvious concern is that the conservative-dominated Supreme Court, where this legal dispute would likely end up, could rule against the Administration. But, as Biden indicated, his Administration is also worried that the legal wrangling could drag on for weeks—or longer—during which the Treasury Department would still have to finance the government, and investors, not knowing how the legal battle was going to resolve, might be reluctant to buy newly issued U.S. debt. In these circumstances, the financial markets could become very volatile, with negative consequences for the broader economy. “There are simply no good options, and the ones that you’ve listed are among the not-good options,” Yellen said earlier this month, when ABC News asked her about possible break-the-glass options, including invoking the Fourteenth Amendment.
It’s hard to argue with the Treasury Secretary’s assessment that passing the X-Date without an agreement would leave the Administration with only bad choices. The Fourteenth Amendment isn’t a get-out-of-jail-free card. It’s also true, however, that passing the X-Date without an agreement would send the country into uncharted territory, where something would have to be done. In such a situation, invoking the Fourteenth Amendment or one of the other emergency options would be squarely in line with Biden’s repeated pledge that he won’t allow the U.S. government to default on its financial obligations under any circumstances.
Right now, though, Biden and his Administration are focussing on reaching an agreement before the X-Date, and they seem to be relying on the theory that congressional Republicans will eventually meet them halfway. After Monday’s meeting at the White House, Biden said that he and McCarthy had reaffirmed that “the only way to move forward is in good faith toward a bipartisan agreement.” It is to be hoped that this approach works. But, as the debt-ceiling drama approaches its climax, House Republicans are ruthlessly exploiting the threat of a debt default to try to seize control of the policy agenda, regardless of the collateral damage that their actions could cause. In the face of this cynical power play, the Administration needs all the leverage it can muster; the progressives are surely right about that. But, in failing to raise the debt ceiling last year when they controlled both chambers in Congress, the Democrats gave up their strongest hand. And, in emphasizing the downsides of the Fourteenth Amendment option, the White House has arguably further weakened its bargaining position—a point that the Washington Post columnists Paul Waldman and Greg Sargent made on Tuesday.
One factor that hasn’t played much of a role so far, but could soon, is Wall Street. So far, the stock market and the bond market have reacted pretty calmly to the debt-ceiling deadline, even though the cost of insuring U.S. debt has risen appreciably. If there is still no agreement as we get closer to June 1st, that could change dramatically. Buckle up. ♦
