On Sunday, Treasury Secretary Janet Yellen said there are “no good options” for the United States to avoid an economic “calamity” if Congress fails to act and raise the nation’s borrowing limit of $31.381 trillion in the coming weeks. Yellen didn’t rule out the possibility of President Joe Biden bypassing lawmakers and acting on his own to avert a possible first-ever federal default.
Yellen’s comments added increased urgency to a high-stakes meeting Tuesday between congressional leaders and Biden from both parties.
Republicans and Democrats are at a deadlock over whether the debt limit should be subject to negotiations. GOP lawmakers, led by Speaker of the House Kevin McCarthy, are demanding spending cuts to raise the borrowing limit, while President Biden has said the default threat shouldn’t be used as leverage in budget talks.
During an interview, Yellen painted a dire picture of what might happen if there is no increase in the borrowing limit before the Treasury Department runs out of what it refers to as “extraordinary measures” to operate under the current cap. Yellen predicted that is expected as early as June 1.
“Whether it’s defaulting on interest payments that are due on the debt or payments due for Social Security recipients or to Medicare providers, we would simply not have enough cash to meet all of our obligations,” said Yellen. “And it’s widely agreed that financial and economic chaos would ensue.”
An increase in the debt limit wouldn’t authorize any new federal spending. It would only permit borrowing to pay for what has already been approved by Congress.
Biden’s White House meeting with Democrat House Minority Leader Hakeem Jeffries, Senate Minority Leader Mitch McConnell, and Senate Majority Leader Chuck Schumer will be the first substantive talks between McCarthy and Biden in months.
On April 26, House Republicans passed a bill to raise the debt limit but impose substantial federal spending cuts. However, the cuts are unlikely to win the support of all GOP members in the Democrat-controlled Senate. President Biden said he would only negotiate government spending after Congress removes the risk of default.
Independent Arizona Senator Kyrsten Sinema, who left the Democrat Party in December, encouraged McCarthy and Biden to meet each other halfway.
“There’s not going to be just a simple, clean debt limit — the votes don’t exist for that,” she said. “So, the sooner these two guys get in the room and listen to what the other one needs, the more likely they are to solve this challenge and protect the full faith and credit of the United States of America.”
Yellen says the president bypassing Congress could be a “constitutional crisis”
In an ABC interview, Yellen was asked whether the president could bypass Congress by citing the 14th Amendment that the “validity” of U.S. debt “shall not be questioned.” Although the secretary didn’t answer definitively, she said it should not be considered a good solution.
“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 added, “What to do if Congress fails to meet its responsibility? There are simply no good options.”
Oklahoma GOP Senator James Lankford agreed about the risks of invoking the 14th Amendment. He said the Constitution is “very clear that spending — all those details around spending and money actually has to come through Congress.”
He criticized the president for being unwilling to negotiate on spending cuts, arguing that the debt limit exists to force a broader conversation on government outlays. “It’s about not just debt that’s incurred,” said the senator. “But, it’s also raising the limit of what we can continue to be able to add on this.”
During the Obama administration, the 14th Amendment question was studied during the 2011 debt limit showdown, which is being used now to inform Biden’s refusal to negotiate directly with Republicans on raising the debt limit. At the time, lawyers for the Justice Department said they didn’t believe the president had the unilateral power to issue new dates.
In an interview with MSNBC Friday, Biden was asked about the 14th Amendment proposal and said, “I’ve not gotten there yet.”
Chairman of the House Intelligence Committee, GOP Representative Mike Turner of Ohio, and the committee’s top Democrat, Representative Jim Himes of Connecticut, said the debt limit debate posed a national security threat.
“The Russians and Chinese would seek to exploit it,” said Himes. “The United States has never really come close to a default on its debt before. So, it’s hard for us to imagine what that might look like.”
Turner maintained Biden would bear the brunt of the responsibility. “I think if the president fails to negotiate with Congress and has continued out-of-control spending that threatens our economy, that is a national security threat.”