According to both Treasury Secretary Janet Yellen and a new Bipartisan Policy Center (BPC) report, the federal government’s debt limit “X Date” — the day on which the United States will no longer be able to meet all of its financial obligations in full and on time — could arrive as soon as early June 1.
BPC Director of Economic Policy Shai Akabas warned, “If a solution is not reached before June, policymakers may be playing daily Russian Roulette with the full faith and credit of the United States, risking financial disaster for their constituents and the country.”
The BPC’s report came as White House and congressional leaders finally met yesterday to discuss the debt limit. How did that meeting go, what comes next, and what in the world does the U.S. Constitution’s 14th amendment, which requires U.S. states to provide equal protection under the law to all people, have to do with any of this?
We tackle those questions this week.
A Reckoning At The White House
President Joe Biden met yesterday with House Speaker Kevin McCarthy (R-Calif.), Senate Majority Leader Charles Schumer (D-N.Y.), and Senate Minority Leader Mitch McConnell (R-Ky.) at the White House to negotiate how to raise the federal debt limit. The discussion was the first face-to-face meeting the president and Speaker McCarthy have had since Feb. 1.
Going into yesterday, President Biden had insisted Congress lift the $31.4 trillion cap on U.S. debt without conditions — meaning without the spending cuts Speaker McCarthy and House Republicans are demanding and, indeed, have already approved on a party-line vote in the House.
As expected, all sides left the meeting reporting no progress had been made toward a deal. Instead, the principals each reported the meeting had only provided an opportunity for both sides to restate their respective positions. Speaker McCarthy also refused to consider a short-term increase to the debt limit in order to give policymakers more time to negotiate.
The inside-the-Beltway news source Punchbowl concluded, “If you’re honestly assessing the situation right now, you’d have to be pretty bearish about the prospects of coming to an agreement by June 1. Lawmakers and aides on both sides said they thought Tuesday’s meeting was mostly a wash.”
Despite the lack of actual progress yesterday at the White House, however, there may be some movement beneath the surface.
What Comes Next?
President Biden will meet with the three lawmakers again on Friday. The “Big Four,” as they are being called, also agreed to have their staffs meet this week to explore a compromise.
In a sign of just how challenging our politics have become, the fact that this group is even talking represents some progress.
But there might be additional cause for optimism.
After Tuesday’s meeting, Politico reported some Democrats said they will “begin discussing a possible budget and spending deal” that pairs a debt limit increase with the spending cuts Republicans so desperately want. In fact, a number of moderate House Democrats have begun to publicly call on the president to negotiate with Speaker McCarthy. While the overwhelming majority of Democrats continue to back the president’s hardline approach, this movement is a notable development. Democrats are beginning to come to terms with reality: any debt limit bill is going to have to be paired with spending cuts in order to pass both chambers of Congress.
Still, Democrats are far from united. In fact, as Politico noted, President Biden and Majority Leader Schumer continue to maintain “there’s nothing to negotiate.” President Biden also has not articulated any spending cuts he would agree to in exchange for a debt limit increase.
Republicans, meanwhile, seem united. Before yesterday’s meeting, 43 GOP senators sent a letter pledging to filibuster a debt ceiling increase that does not include “substantive spending and budget reforms.” Senate Minority Leader McConnell signed the letter.
While there was no deal coming out of yesterday’s meeting, news was made. After the “Big Four” left the White House, President Biden acknowledged he is considering invoking the 14th amendment to avert default.
The 14th Amendment
The 14th amendment generally deals with the rights of citizens versus U.S. state authority, but it also includes a phrase that says the nation’s debt “shall not be questioned.”
Some legal scholars have argued those words mean the federal government must pay its debts — no matter what — and that, as a result, Congress’ authority to set a debt limit is unconstitutional.
According to The Hill, constitutional scholar Laurence Tribe told President Biden invoking the 14th amendment would be “legitimate.”
In a New York Times op-ed published three days ago, Tribe explained his reasoning. “The right question is whether Congress — after passing the spending bills that created these debts in the first place — can invoke an arbitrary dollar limit to force the president and his administration to do its bidding,” Tribe wrote. “There is only one right answer to that question, and it is no.”
Tribe compared a decision to invoke the 14th amendment in this instance to President Abraham Lincoln’s decision to briefly override habeas corpus in 1861. “For a president to pick the lesser of two evils when no other option exists is the essence of constitutional leadership, not the action of a tyrant. And there is no doubt that ignoring the debt ceiling until Congress either raises or abolishes it is a lesser evil than leaving those with lawful claims against the Treasury out in the cold,” Tribe concluded.
Tribe has allies. As The Associated Press reported, on Monday a government employee union – whose members very well could see delays in their paychecks in the absence of a breakthrough before the end of the month – sued the Treasury Department to try to stop it from complying the debt limit. The lawsuit argues the department has no authority to decide which bills get paid, and which do not, in the event of a debt limit breach. “Nothing in the Constitution or any judicial decision interpreting the Constitution allows Congress to leave unchecked discretion to the president to exercise the spending power vested in the legislative branch by canceling, suspending, or refusing to carry out spending already approved by Congress,” the lawsuit states.
To be sure: President Biden’s Treasury Secretary Janet Yellen disagrees. Yellen has said, “[W]e 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.”
While invoking the 14th amendment could prevent a default, it almost certainly would result in litigation that would quickly find its way to the Supreme Court, leaving the government’s ability to issue new debt in legal limbo for months. In short: invoking the 14th amendment is unlikely to provide a solution to the crisis, even if it’s being viewed at the White House as a last-ditch tool.
While Laurence Tribe and federal employees want President Biden to invoke the 14th amendment anyway, what do voters want?
The Consequences Of Inaction
This week, the S-Corp Association, which represents thousands of U.S. small businesses warned, “[D]efault risks the livelihoods of American small businesses, retirees, and working families and would hand a massive win to China …” Clearly there will be economic consequences if the White House and congressional leaders cannot come together to find a bipartisan solution.
And there may be political consequences as well — it’s just unclear for whom.
Voters are incredibly divided – and potentially confused – on this issue. According to a CBS News/YouGov poll released this week, 54 percent of voters oppose raising the debt ceiling in general. That number fell to 30 percent, however, when respondents were asked if they would let the U.S. default. A survey by the Winston Group conducted in late April found 48 percent of voters believe the president should negotiate with congressional leaders while only 14 percent supported the president’s insistence on a “clean increase.” An early February ABC News/Washington Post poll found 65 percent of voters said the issue of the debt ceiling and spending cuts should be separate.
And who will voters hold responsible if Congress and the White House cannot come to an agreement? According to a March Morning Consult survey, all parties!
That survey found 37 percent of voters said they would blame both Republicans and Democrats equally if the country were to default. Thirty percent said they would blame Democrats and 24 percent said they would blame only Republicans.
With only 10 legislative days remaining in the House of Representatives before June 1, there very well could be plenty of blame to go around if a deal isn’t struck soon.