Using the 14th Amendment to Avoid Debt Default?

Debt-Ceiling Standoff: Will the 14th Amendment Be Invoked?

What’s Happening?

As the U.S. government approaches the X-date, when it can no longer borrow and must rely on incoming revenue to settle its obligations, the idea of invoking the 14th Amendment has come into the spotlight. This would involve using executive power to declare the debt ceiling unconstitutional and prevent a U.S. sovereign debt default if negotiations on raising the debt cap fail.

The Current Situation

The United States hit its $31.4 trillion debt ceiling in January, leaving it to Congress to raise the cap and allow the government to keep paying its bills. Democrats have insisted on legislation with no preconditions to raise the debt ceiling, while Republicans have demanded spending cuts in exchange for their support to lift the borrowing cap.

President Joe Biden and House Speaker Kevin McCarthy (R-Calif.) are slated to meet this week to discuss raising the debt ceiling, while Treasury Secretary Janet Yellen has warned that if no solution is reached, then the X-date (and a possible debt default) could come as early as June 1.

The 14th Amendment

Biden has suggested that he’s considering invoking the 14th Amendment, which reads in part that the “validity” of America’s public debt “shall not be questioned.” However, Yellen downplayed the idea that this would be a viable solution, calling it a “constitutional crisis.”

The Risks

With rhetoric heating up around the possibility of a debt default, attention has increasingly turned to what measures aside from a congressionally approved lifting of the debt ceiling could be reached to avoid what Yellen said would be an “economic calamity.” Some two dozen Republican senators have expressed their commitment to oppose raising the debt cap without “substantive spending and budget reforms.”

The Bottom Line

The risk of a debt default is real, and the consequences could be dire. It’s up to Congress to act and raise the debt ceiling to avoid an economic and financial catastrophe. The question remains whether the 14th Amendment will be invoked as a last-ditch measure to prevent a default.