In a move that highlights the growing political divide over raising the nation’s debt limit, the National Association of Government Employees (NAGE) has filed a lawsuit seeking to block the enforcement of a law that sets the debt limit.
Representing over 100,000 public and private sector employees across forty states, NAGE argues that the law is unconstitutional and violates the separation of powers between the executive and legislative branches of government.
The lawsuit, filed in Massachusetts’ federal trial court on Monday, contends that if the debt limit is reached, it would force President Biden and Treasury Secretary Janet Yellen to prioritize payments, effectively taking over Congress’s spending authority.
NAGE asserts that this would infringe upon the separation of powers as outlined in Articles I and II of the Constitution.
The organization is seeking an injunction to prevent the cancellation or suspension of federal government operations based on reaching the debt limit.
“The Debt Limit Statute is unconstitutional because it puts the President in a quandary to exercise discretion to continue borrowing to pay for the programs which Congress has heretofore duly authorized and for which Congress has appropriated funds or to stop borrowing and to determine which of these programs the President, and not the Congress, will suspend, curtail, or cancel altogether,” states the complaint.
NAGE warns that its members, including nearly 75,000 federal employees, are at risk of imminent layoffs or furloughs if the debt limit is not raised.
Treasury Secretary Yellen has also expressed concerns, noting that the U.S. could potentially default on its debt as early as June 1 if the borrowing limit is not increased.
Efforts to reach a bipartisan agreement on raising the debt ceiling have faced significant challenges.
President Joe Biden is set to meet with Speaker Kevin McCarthy and other congressional leaders at the White House to discuss the issue, but a resolution appears to be distant.
The lawsuit also invokes the 14th Amendment, which stipulates that the “validity of the public debt of the United States… shall not be questioned.”
NAGE argues that federal debts must be paid under this amendment, and any refusal to do so would violate constitutional obligations.
While some have suggested invoking the 14th Amendment to resolve the issue, Yellen has cautioned against it, stating that it would create a “constitutional crisis.”
She emphasized the importance of Congress raising the debt ceiling to ensure the stability of the financial system and the economy.
Biden and his team are approaching the prospect of a debt ceiling escape hatch that hinges on the 14th Amendment with extreme caution ahead of a pivotal meeting with congressional leaders at the White House on Tuesday.
Some officials have openly voiced concerns about the legal standing of using the 14th Amendment to solve the debt crisis and the potential financial ripple effects of going that route.
While not entirely ruling it out, Biden and other senior officials are hardly embracing the idea, which revolves around language in the 14th Amendment that says the public debt “shall not be questioned.”
The idea of using that language to allow Biden to unilaterally continue to issue debt has reportedly been floated privately within the administration.
As the lawsuit moves forward, it underscores the urgency and complexity surrounding the nation’s debt limit debate.
The president has previously expressed opposition to changes to the traditional debt ceiling process. Asked last October about abolishing the debt ceiling entirely, Biden called the idea “irresponsible.”
Mark Zandi, the chief economist at Moody’s Analytics who is often cited by Biden administration officials, told senators in March that a 14th Amendment declaration “seems the most viable option” if the nation is about to breach the debt limit.
“Investors would rightly wonder if using the 14th Amendment to abrogate the debt limit law would stand up in the courts, and even if so, what it means for our political system’s checks and balances. Given the constitutional crisis this would set off, financial markets would still be roiled, and a recession would ensue,” Zandi said in testimony before a Senate subcommittee on economic policy.
The outcome of this legal challenge could have significant implications for the balance of power between the executive and legislative branches, as well as the financial well-being of the country.