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Is the debt limit constitutional? Biden aides discuss it.

A standoff between House Republicans and President Biden over raising the nation’s borrowing limit has the administration debating what to do if the government runs out of cash to pay its bills, including an option that previous administrations had considered unthinkable.

That option is actually a constitutional challenge to the debt limit. According to the theory, under the 14th Amendment, the government would be required to continue issuing new debt to pay bondholders, Social Security recipients, government employees and others, even if Congress fails to lift the limit before the so-called X date.

This theory rests on the 14th Amendment clause which states that “the validity of the public debt of the United States, authorized by law, including debts incurred for the payment of pensions and bounties for services in suppressing insurrection or insurrection, shall not be questioned.”

Some legal scholars argue that the language overrides the statutory borrowing limit, which currently caps the federal debt at $31.4 trillion and requires congressional approval to raise or lift.

Top White House economic and legal officials, the Treasury Department and the Justice Department have made that theory the subject of intense and inconclusive debate in recent months, according to several people familiar with the discussions.

It is unclear whether President Biden would support such a move, which would have dire consequences for the economy and almost certainly prompt legal challenges from Republicans. Continuing to issue debt in that situation would avoid an immediate disruption in consumer demand by maintaining government payments, but borrowing costs would likely rise, at least temporarily.

Still, the debate is starting to take on new pressure as the U.S. moves closer to the standard. Finance Minister Janet L. Yellen warned on Monday that the government could run out of cash as early as June 1 if the borrowing ceiling is not lifted.

Mr. Biden is to meet Speaker Kevin McCarthy of California at the White House on May 9 to discuss fiscal policy, along with other top congressional leaders from both parties. The President’s invitation was spurred by the accelerated warning of the arrival of the X-date.

But it remains unclear what kind of compromise can be reached in time to avoid default. House Republicans have refused to raise or suspend the debt ceiling unless Biden agrees to spending cuts, support for fossil fuels and a repeal of Democratic climate policies contained in a bill that narrowly cleared the chamber last week.

Mr. Biden has said Congress must raise the cap without conditions, though he has also said he is open to separate discussions about the nation’s fiscal path.

A White House spokesman declined to comment Tuesday.

A group of legal scholars and some liberal activists have been pressing the constitutional challenge to the borrowing limit for more than a decade. No previous administration has addressed it. Lawyers at the White House and the Justice and Treasury Departments have never issued formal statements on the issue. And legal scholars disagree about the constitutionality of such a move.

“The text of the Constitution prevents the federal government from defaulting on its debt — even a little, even for a short time,” Garrett Epps, a constitutional scholar at the University of Oregon’s law school, wrote in November. “There is a case to be made that if Congress decides to default on the debt, the president has the power and the duty to pay it without Congressional authorization, even if it requires borrowing more money to do so.”

Other legal scholars say the limit is constitutional. “The statute is a necessary component of Congress’s power to borrow and has proven capable of serving as a useful catalyst for budget reforms aimed at debt reduction,” Anita S. Krishnakumar, a law professor at Georgetown University, wrote in a 2005 law review article.

The president has repeatedly said that it is Congress’ job to raise the limit to avoid a financially catastrophic default.

Top officials, including Yellen and White House press secretary Karine Jean-Pierre, have sidestepped questions about whether they believe the constitution will force the government to continue borrowing to pay its bills after the X date.

ABC News asked Yellen in the midst of a 2021 debt ceiling if she would invoke the 14th Amendment to resolve it.

“It is the responsibility of Congress to show that they have the will to pay the bills that the government is racking up,” she said. “We should not be in a position where we need to consider whether the 14th Amendment applies or not. It is a catastrophic situation that the country should not be in.”

The government reached its borrowing limit on January 19, but finance officials are able to put in what are known as extraordinary measures to keep paying bills on time. The measures, which are essentially accounting maneuvers, are set to expire sometime in the next few months, possibly as soon as June 1. The government would default on its debt if the treasury stopped paying all bills. Economists have warned that it could lead to financial crisis and recession.

Progressive groups have urged Mr. Biden to take actions intended to bypass Congress on the debt limit and continue uninterrupted spending, such as minting a $1 trillion coin to deposit with the Federal Reserve. Internally, administration officials have dismissed most of them. Publicly, Biden aides have said the only way to avert a crisis is for Congress to act.

“I know you probably get tired of me saying this over and over again, but it’s true,” Jean-Pierre said Thursday, after referring a question about the 14th Amendment to the Treasury Department. “It is their constitutional duty to get this done.”

But inside the administration, it remains an open question what the Treasury Department would do if Congress doesn’t lift the cap in time — because, many officials say, the law is unclear and so is the Constitution, which gives Congress the power to tax and spend money.

Officials who support invoking the 14th Amendment and continuing to issue new debt argue that the government will be exposed to lawsuits regardless. If it fails to continue paying its bills after the X date, it can be sued by anyone who is not paid on time in the event of default.

Other officials have argued that the statutory borrowing limit is binding, and that an attempt to ignore it would result in an immediate legal challenge that would most likely go quickly to the Supreme Court.

There is broad agreement on both sides of the debate that the move risks shaking the financial markets. That would likely lead to an increase in short-term borrowing costs because investors would demand a premium to buy debt that could be invalidated by a court.

Moody’s Analytics economist Mark Zandi modeled such a situation this year and found that it would create short-term economic damage but long-term gains if the courts upheld the constitutional interpretation—by removing the threat of future cross-border threats.

“The extraordinary uncertainty created by the constitutional crisis is leading to a sell-off in financial markets until the Supreme Court rules,” Zandi wrote in March. Economic growth and job creation will be dampened briefly, he added, “but the economy is avoiding a recession and recovering quickly.”

Obama administration officials briefly considered — and quickly rejected — the constitutional theory when Republicans refused to raise the cap in 2011 unless the president agreed to spending cuts. Treasury attorneys never issued a formal opinion on the issue and have yet to do so this year, department officials said this week.

But in a 2011 letter to the editor of The New York Times, George W. Madison, who was the Treasury Department’s general counsel at the time, suggested that department officials did not subscribe to the theory. He directly challenged a claim by the constitutional law professor Laurence H. Tribe, who wrote in an opinion essay in The Times that Treasury Secretary Timothy F. Geithner had pushed to embrace the interpretation of the 14th Amendment, which Mr. Tribe opposed.

“Like all previous Secretaries of State who have confronted the issue,” Madison wrote, “Secretary Geithner has always viewed the debt limit as a binding legal limitation that can only be addressed by Congress.”

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