President Biden has indicated that he is considering invoking the 14th Amendment to the Constitution to bypass the requirement that Congress raise the debt ceiling. (ddp)

Debt ceiling extension slog

Both sides reiterated their well-known positions on measures needed to extend the debt ceiling. Since neither side is likely going to get most of what they want, a third way will have to be found. With each side well aware of this reality, quiet negotiations among lawmakers have now begun. Various members from the two parties have floated possible solutions to break the impasse to party leaders, but none have gained traction yet.

President Biden laid down a few “red lines” in terms of areas of federal spending that he would not support cutting as part of any deal, which is a good sign that he is preparing for negotiations. President Biden and top lawmakers are scheduled to meet again today. The quiet negotiations are what we think will ultimately lead to a final deal, though they will not get to a more serious stage until we get closer to the X-date next month.

X-date clarity

Since Treasury Secretary Janet Yellen announced two weeks ago that the X-date could be as early as 1 June, that date has effectively served as the date by which Congress must act to avoid default. Most lawmakers, however, believe the Secretary has additional flexibility and soon will announce a more precise X-date. Outside budget expert groups have recently identified likely X-dates from early June to mid-August. If a new X-date is announced, we think it will likely not give Congress significantly more time to complete its work. If a change is made, late June or early July seems plausible to us at this time.

Temporary solution?

Some lawmakers and the media have suggested that more time is needed to craft a bipartisan agreement and that the debt ceiling should be extended for a few weeks or months to allow more time to negotiate. That scenario could materialize eventually, but we think it won’t in the next few weeks. A short-term punt would more likely be done at the last minute if it was clear that a bipartisan compromise wasn’t ready by the X-date, in our view.

14th amendment relevance?

President Biden has indicated that he is considering invoking the 14th Amendment to the Constitution to bypass the requirement for Congress to raise the debt ceiling. The amendment broadly addresses issues relating to the rights of US citizens but also contains a provision (Section 4) that “the validity of the public debt of the United States… shall not be questioned.” Whether this provision negates the need for Congress to extend the debt ceiling is unclear, and many constitutional scholars are doubtful of that.

Secretary Yellen recently indicated that the use of the 14th Amendment as a substitute to congressional passage of legislation would amount to a default. She follows a long list of previous Treasury secretaries from both parties who have concluded the same. We don’t view the current effort to cite the 14th Amendment as a way to bypass Congress this year, but legal clarity on the issue could help in knowing whether it could be used in future standoffs.

For more on issues affecting Washington this week, including the defense bill, rail safety, and congressional convictions, read Washington Weekly 12 May 2023.