The United States is facing a standoff between House Republicans and President Biden over raising the nation’s borrowing limit. If the government runs out of cash to pay its bills, including pensions, bounties, and salaries, administration officials are considering options previously thought to be unthinkable. One such option is effectively a constitutional challenge to the debt limit, under which the government would continue to issue 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. This theory rests on the 14th Amendment clause, which states 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.”
Legal scholars contend that the above clause overrides the statutory borrowing limit, which currently caps federal debt at $31.4 trillion and requires congressional approval to raise or lift. The White House, Treasury Department, and the Justice Department have engaged in intense discussions on the matter, with no resolution in sight.
Treasury Secretary Janet L. Yellen warned that the government could run out of cash as early as June 1 if the borrowing cap is not lifted. President Biden is set to meet with Speaker Kevin McCarthy of California on May 9 to discuss fiscal policy, 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.
Some legal scholars and liberal activists have pushed the constitutional challenge to the borrowing limit for more than a decade, 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.
“The Constitution’s text bars the federal government from defaulting on the debt — even a little, even for a short while,” said Garrett Epps, a constitutional scholar at the University of Oregon’s law school. “There’s a case to be made that if Congress decides to default on the debt, the president has the power and the obligation to pay it without congressional permission, even if that requires borrowing more money to do so.”
Other legal scholars say the limit is constitutional. “The statute is a necessary component of Congress’s power to borrow and has proved capable of serving as a useful catalyst for budgetary reform aimed at debt reduction,” said Anita S. Krishnakumar, a Georgetown University law professor, in a 2005 law review article.
The President has repeatedly said that it is the job of Congress to raise the limit to avoid an economically catastrophic default. The administration has rejected most proposals to circumvent Congress on the debt limit and continue uninterrupted spending, like minting a $1 trillion coin to deposit with the Federal Reserve. Internally, administration officials have said that the only way to avert a crisis is for Congress to act.
But inside the administration, it remains an open question what Treasury would do if Congress does not raise the limit in time, because many officials say the law is unclear and so is the Constitution, which gives Congress the power to tax and spend. It is unclear whether President Biden would support a constitutional challenge to the debt limit, which would have serious ramifications for the economy and almost certainly elicit legal challenges from Republicans. Borrowing costs are likely to soar, at least temporarily, but continuing to issue debt in that situation would avoid an immediate disruption in consumer demand by maintaining government payments.
