With Republicans and the White House at odds over raising the debt ceiling, some have suggested that President Joe Biden invoke the 14th Amendment to issue new debt without authorization from Congress.
While the move would be politically fraught and constitutionally debatable, Biden could try to sidestep negotiations with Congress entirely to raise the debt limit via the 14th Amendment. The move was pondered by the Obama administration during the 2011 standoff, but his lawyers were not confident in the plan.
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The idea of using the Constitution to supersede Congress on the debt ceiling is based on a broad reading of Section 4 of the amendment, which reads, “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.”
Proponents of invoking the 14th Amendment claim the amendment itself renders the debt ceiling unconstitutional and gives Biden the power to override the GOP and compel the Treasury to continue issuing government bonds.
“The debt ceiling casts doubt on the validity of the debt because what it says is that if the debt ceiling becomes binding, the country won’t be able to pay some of its obligations,” Neil Buchanan, an economist and professor of law at the University of Florida, told the Wall Street Journal.
In recent months, Biden aides have been discussing the possibility of using the 14th Amendment to declare the debt ceiling unconstitutional, although advisers view doing so, or using other unconventional measures, as risky, the Washington Post reported.
Treasury Secretary Janet Yellen, who, besides Biden, is perhaps the biggest player in the situation now unfolding, has not ruled out invocation of the 14th Amendment although has said it would be a "not good" option.
“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. This would be a constitutional crisis,” Yellen said over the weekend.
Still, Yellen did not clearly rule out the move and avoided a direct answer about the matter during an appearance on ABC’s This Week.
“If Congress fails to meet its responsibility, there are simply no good options. And the ones that you've listed are among the not-good options,” she said.
One major problem with the plan is it would likely result in an immediate legal reaction. A lawsuit casting doubt on newly issued Treasury securities could create havoc in the markets, which is the exact result the move would be meant to avoid.
Biden and House Speaker Kevin McCarthy (R-CA) are meeting Tuesday to discuss the situation for the first time in months. Republicans want to use the opportunity as leverage to score concessions on spending cuts, although Biden and Democrats have balked at the notion and want to see a clean raise without cuts.
McCarthy offered up a plan that would raise the debt ceiling over the next year either by $1.5 trillion or until March 31, 2024, whichever comes first. But the plan would cut back on spending and includes other provisions that might be nonstarters to Democrats, such as increasingly stringent work requirements for welfare.
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The consequences of failing to agree to a lift would be disastrous to the U.S. economy. A technical default would cause tumult in the markets and further complicate the Federal Reserve’s work to lower inflation while sidestepping a recession.
A recent analysis by Moody’s found that a default could wreak havoc on the country’s GDP growth and would result in millions of lost jobs.