DESPITE the fact that time is running out and he insists that ‘default’ is not an option, President Joe Biden maintains his firm commitment to cut federal public spending demanded by the Republicans to raise the debt ceiling of the United States and is considering invoking Amendment 14, despite early warnings about its possible unconstitutionality.
The ‘tug of war’ between the Democratic president and the president of Congress, the conservative Kevin McCarhy, completes two weeks without any sign of a solution and with enormous programmatic differences on how and where to minimize expenses to curb the constant increase in public debt .
Biden, who cut short his Asian tour and returned to the country this Sunday in the face of the increasingly complex panorama for this crucial issue, described as “unacceptable” the opposition proposals that contemplate lowering public spending to last year’s level, which represents a cut of USD 130,000 million, which would basically be achieved with a reduction in the internal spending of the White House, as well as in some social programs such as aid for housing and scientific research.
The Democratic government initially proposed reducing spending on defense, as well as on the aforementioned aid and education, making a ‘concession’, as the White House described it, to the Republicans who set the resources for the Army, the care of veterans as immovable and border security.
But that initial plan collapsed when the Democrats raised taxes on the richest and on companies that today benefit from tax refunds to cover the inevitable increase in the level of indebtedness, which their conservative peers strongly opposed.
President Biden admitted that it is precisely about tax revenues where the “big disagreements” are. For this reason, and without the optimism expressed days ago to achieve a bipartisan agreement, this Sunday he mentioned the possibility of appealing to the Constitution to avoid a default, in which the Treasury Secretary herself, Yanet Yellen, warned that it would fall as of this June 1, since until that date there are resources to pay the debts.
“Unfortunately, the White House backed down,” McCarthy told reporters on Capitol Hill on Saturday. “They actually want to spend more money than we did this year. We can not do that. We all know how big this deficit is,” he insisted..
The United States exceeded the maximum limit of issuance of public debt in January, of 31.4 trillion dollars, and since then extraordinary measures have been applied that only allow it to meet the obligations for a while. Even so, concrete effects of the political crisis of the debt ceiling are being felt, as Secretary Yellen reported days ago, noting in particular the increase in the cost of borrowing for the government.
Investors have become more reluctant to hold sovereign debt due in June. The interest rate on one-month US Treasuries rose to 5.74%, the highest in at least twenty years, from 3.29% in mid-April and the central bank benchmark rate is significantly lower. higher, currently in a range between 5.00% and 5.25%, something unusual,” said the official.
What is the 14th amendment? –
As is known, the so-called “ceiling” of the debt is traditionally the subject of a bipartisan negotiation and is basically the agreement that allows raising the country’s credit. Said approval has depended on Congress for decades and although it is a routine procedure, since the Democratic president does not have a majority in both Chambers, whose control he generally loses in at least one of them in the ‘midterms’ (midterm elections) Forced to negotiate, which in itself implies concessions, the Bidens seem unwilling to give and that is why they are considering invoking the 14th amendment.
The last time that this constitutional provision was on the political scene was in 2013, when then-President Barack Obama was urged by several Democratic leaders to use it in view of the disagreement with the Republicans. For this same issue, the legal team recommended not to do so when considering that he had no legal authority to do so. Now, Biden considers the opposite and says he has the power and authority to do so, which would flatly rule out a new meeting with MaCarthy and the leader of the Republican minority in the Senate, Mich McConell.
“The time has come for the other (Republican) side to abandon their extreme positions, because much of what they have proposed is simply and simply unacceptable,” Biden declared from Hiroshima where the G7 summit concluded. He then declared, “I’m considering the 14th amendment,” reiterating his criticism of Republicans.
The 14th Amendment, added in 1868 to the Constitution, stipulates that “the validity of the public debt of the United States, authorized by law, (…) is not to be questioned.” In other words, the expenses already voted must be able to be paid.
Historians say it was intended to ensure that the federal government did not evade its debts, as some former Confederate states had done.
But the provision has largely gone unaddressed by the courts, and legal experts disagree on what it requires of Congress and the presidency.
According to some experts, this provision makes the debt limit unconstitutional.
If the Treasury borrows above the debt limit set by Congress, that would violate the law, said Neil Buchanan, a law professor at the University of Florida.
But failing to meet spending obligations set by Congress could be a worse violation, giving the Treasury justification to borrow more money and keep paying its bills.
Invoking the 14th Amendment could lead to litigation, but failing to do so also carries risks.
If the Treasury runs out of room to meet its obligations and ends up delaying certain payments, creditors have a “perfectly valid legal claim,” Buchanan said.
Social Security recipients who don’t receive their checks could join a class action lawsuit, he added.
On the other hand, if the Biden administration continues to borrow money, Republicans could sue it for defaulting on the debt ceiling.
That would put them “in a very uncomfortable position, because they would be suing to force the president to default on the national debt,” said Robert Hockett, a Cornell University law professor.
As it is, it is not clear who could file a lawsuit. It may be difficult for any plaintiff to prove that he has been harmed by the action—a legal concept known as “standing.”
The Supreme Court ruled in 1997 that individual lawmakers have no standing to bring such lawsuits, but Congress could potentially vote to say it had been collectively wronged.
The high court could also choose to hear a challenge in the interest of quickly resolving the issue, as it has done with Biden’s move to cancel $430 billion in student debt.
Any case would enter uncharted legal territory.
The Supreme Court has ruled on the public debt clause only once, in a 1935 challenge to Democratic President Franklin Roosevelt’s decision to take the United States off the gold standard. The court ruled that the plaintiff, a bondholder, did not have standing to bring the case.
“We can reach an agreement,” Biden reiterated during his return flight to Washington from Japan aboard Air Force One this Sunday. But “I can’t guarantee they wouldn’t force a default,” he added of his opponents, to justify his consideration of the 14th Amendment.
“I think we have the power” to use the resource, but “the question is whether it can be done and invoked on time,” he added.
With sharp rhetoric, although the will of the parties, this key negotiation is at a standstill and with the clock ticking against it. But both are aware that a potential default would likely plunge the US into recession and rock the global economy. Will Biden give in to conservative strings or gamble on the 14th Amendment? It will be known this week.