US President Joe Biden told reporters in Japan on Sunday that he believed he had the authority to invoke the 14th Amendment to the US Constitution to raise the debt ceiling without Congress, but said it was unclear that enough time remained to try to use that untested legal theory to avoid default.
Meanwhile, US Treasury Secretary, Janet Yellen said invoking the amendment "doesn't seem like something that could be appropriately used in these circumstances, given the legal uncertainty around it, and given the tight time frame we're on."
Section Four of 14th Amendment, adopted after the 1861-1865 Civil War, states that the “validity of the public debt of the United States ... shall not be questioned.” Historians say that aimed to ensure the federal government would not repudiate its debts, as some former Confederate states had done.
But the clause has been largely unaddressed by the courts, and legal experts disagree about what it requires from Congress and the presidency.
Biden also issued a stark warning that congressional Republicans could use a national default to damage him politically and acknowledged time had run out to use potential unilateral actions to raise the federal borrowing limit, a sharp shift in tone days before the deadline to reach an agreement. Characterising GOP proposals as “extreme” and warning they couldn’t gain sufficient support in Congress, Biden said he wasn’t able to promise fellow world leaders gathered in Japan the US would not default. “I can’t guarantee that they will not force a default by doing something outrageous,” he said.
Biden’s remarks, delivered before he left for Washington, were the latest indication that talks between the White House and congressional Republicans remain far apart. Biden directed his aides to schedule a call today with House Speaker Kevin McCarthy, after the top Republican accused the White House of backtracking in talks on raising the US debt limit. Meanwhile, Yellen on Sunday said June 1 remains a “hard deadline” for raising the federal debt limit, with the odds quite low that the government will collect enough revenue to bridge to June 15, when more tax receipts are due.
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Yellen, speaking on NBC's “Meet the Press” program, said there would be hard choices to make about payments to Americans if Congress failed to raise the $31.4 trillion debt ceiling before Treasury ran out of cash and was forced to default.
"I indicated in my last letter to Congress that we expect to be unable to pay all of our bills in early June and possibly as soon as June 1. And I will continue to update Congress, but I certainly haven't changed my assessment. So I think that that's a hard deadline," she said.
Republicans and the White House are battling over spending cuts, which GOP lawmakers demand as the price for raising the federal borrowing limit. Lawmakers are stepping up attacks on each other. Republicans rejected a White House proposal that would have kept both non-defence and defence discretionary spending flat next year compared with the 2023 fiscal year, according to two people familiar with the talks.
McCarthy has said he wants spending cuts from the previous year for non-defense spending, while Democrats argue that keeping appropriations flat amounts to an effective cut because of inflation. Republicans have also said that in addition to the cuts, they want an increase in the Pentagon’s budget. That has met resistance from the White House, which believes the two combined demands would mean that domestic priorities such as health care and education programs would be slashed even further. Disputes over changes to the tax code have also made their way into the talks. Democrats have continued to pitch for closing certain loopholes benefiting fossil-fuel and pharmaceutical companies, as well as cryptocurrency traders.
Republicans have rejected any proposals that would raise tax rates, while urging the renewal of Trump-era tax cuts set to expire as soon as 2025.
Republicans provided an offer of their own on Friday night, White House Press Secretary Karine Jean-Pierre said. But she characterized the package as containing “a set of extreme partisan demands that could never pass both Houses of Congress.”
The GOP offer was a “big step back,” Jean-Pierre said in a statement, adding that Republican leaders appeared “beholden to its MAGA wing.” Biden signaled earlier Saturday he remains confident the US government can avoid a catastrophic default.
For a deal to succeed, cuts must be significant enough to pacify conservative Republicans, who have backed McCarthy’s speakership on the condition that he extract serious spending reforms without raising taxes or slashing military spending and veterans benefits.
But a plan also has to be palatable to Democrats, who hold a Senate majority and will likely need to provide between 50 and 100 votes in the House. Few in the president’s party want to see domestic programs cut, especially without corresponding cuts to the Pentagon budget or the closing of tax loopholes used by the wealthy and large corporations.
The desire to wait for Biden may be informed by a Republican belief that the president will ultimately decide to sacrifice progressive priorities to defuse the biggest threat to the economy ahead of his reelection campaign. The president has already de-facto retreated from his pledge not to negotiate over raising the debt ceiling.
The debt-limit fight, which could trigger a first-ever US payments default, threatens to inflict pain on the global economy.
It has shadowed Biden’s overseas trip and the president previously decided to cut his travels short in order to return to Washington for the final stages of negotiation.
A Republican walk-out of talks Friday in Washington shattered hopes that negotiators were nearing a deal to raise the borrowing cap, sending stocks sliding. McCarthy had hoped to at least forge an agreement on an outline for a deal this weekend to tee up a House floor vote on legislation next week.
The Senate has left Washington for its Memorial Day recess, but senators have been told to be prepared to return on 24-hours notice if needed.
