The United States Congressional Budget Office said on Friday it sees a “significant risk” of a default in the first half of June in case the debt ceiling is not lifted. “The Congressional Budget Office projects that if the debt limit remains unchanged, there is a significant risk that at some point in the first two weeks of June, the government will no longer be able to pay all of its obligations,” the CBO stated. However, the CBO added that, in case the “the Treasury’s cash and extraordinary measures are sufficient to finance the government until June 15, expected quarterly tax receipts and additional extraordinary measures will probably allow the government to continue financing operations through at least the end of July.” The White House and congressional leaders have so far failed to reach an agreement on raising the debt limit and are set to continue talks next week. NN: I am not liking the trajectory the debt ceiling negotiations are on. The dangers is reliance on civil war era 14 Amendment which was ratified on July 9, 1868, after the American Civil War to abolish slavery and ensure civil rights for Black Americans. It has since become a powerful amendment that has played a role in crucial legal cases and Supreme Court decisions. Some legal experts say the 14th Amendment could provide the president a legal mechanism to raise the debt ceiling, specifically pointing to Section Four of the amendment. Which states:
“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,”
Alison LaCroix, a University of Chicago law professor supported the interpretation stating: the legal theory behind advocates for invoking the 14th Amendment is based around the idea that Congress, by imposing a debt limit, is in violation of this clause and that Biden can argue he is constitutionally bound to continue paying the government’s debt.
“The most aggressive reading, I think would be, that when Congress set the debt ceiling or the debt limit, that in itself was an infringement of the 14th Amendment because it called into question the validity of the public debt,” LaCroix said.
Should Biden invoke the 14th Amendment, he could face a lawsuit, but that would likely have to come from a member of Congress who is able to prove he or she was harmed by the action, said LaCroix. Courts, however, could determine this is a political dispute that should be decided between Executive and Legislative branches.
Yellen warned during an appearance on ABC News’ This Week that Biden invoking the 14th Amendment, which could be largely uncharted legal territory, would create a “constitutional crisis,” urging lawmakers to reach a deal. “Our priority is to make sure that congress does its job. 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,” she said.
Meanwhile, Biden said he has “not gotten there yet” when asked if he supports invoking the amendment during an MSNBC —but he has not publicly ruled out turning to this as a last resort should Congress fail to reach a deal.
I am concerned the markets may not take this very well. We are in dangerous uncharted territory here.