Yellen says invoking the 14th Amendment to raise the debt limit is ‘legally questionable’

Yellen says invoking the 14th Amendment to raise the debt limit is ‘legally questionable’

Treasury Secretary Janet L. Yellen on Thursday downplayed the possibility that President Biden could essentially bypass the debt limit by invoking the 14th Amendment, calling the idea “legally questionable.”

His comments come as lawmakers and the Biden administration remain deadlocked over whether and how to raise the debt ceiling, which limits how much money the federal government can borrow. Last week, Yellen warned lawmakers that the United States could run out of cash to pay its bills on time by June 1.

Biden is scheduled to meet with top congressional leaders again on Friday after an initial meeting on Tuesday failed to strike a deal.

The reckless move has raised questions about whether the Biden administration can act on its own to raise the $31.4 trillion borrowing limit, relying on a 14th Amendment clause stating that “the validity of the United States’ public debt, authorized by law, including debts incurred for the payment of pensions and rewards for services in suppressing insurrection or rebellion, shall not be called into question.”

The strategy would effectively be a constitutional challenge to the debt limit. Under the theory, the government would be required by the 14th Amendment to continue issuing new debt to pay bondholders, Social Security recipients, government officials and others, even if Congress does not lift the cap before the so-called X date.

Mrs. Yellen, however, continued to dismiss this idea.

“Clearly there would be litigation around this; it’s not a short-term solution,” Yellen told a news conference in Japan ahead of a meeting of Group of 7 finance ministers. “It is legally questionable whether or not this is a viable strategy.”

Biden administration officials have weighed in on the idea, but the president also expressed similar skepticism this week after meeting with House Speaker Kevin McCarthy and predicting that unilateral action to raise the debt limit without Congress would spur litigation.

As she prepared to meet her international colleagues, Ms. Yellen warned that failing to raise the debt limit would have dire consequences for the United States and the world economy. She noted the significant uncertainty associated with a default, but predicted that a sharp decline in government spending combined with the expected turmoil in financial markets would lead to a “very substantial recession”.

“A default would threaten the gains we’ve worked so hard to make over the last few years in our pandemic recovery,” Yellen said. “And that would trigger a global recession that would set us back much further.”

She added: “It would also risk undermining US global economic leadership and raise questions about our ability to defend our national security interests.”

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