As the United States finds itself embroiled in a political standoff over a vote to raise the debt ceiling, the nation, and indeed the world, watches to see if the impasse will be resolved in time to prevent default. With less than one week to go, there’s a whole range of directions this crisis could head.
Here are Five Facts on how the debt ceiling standoff could be resolved:
1. President Biden could invoke the Fourteenth Amendment to declare the debt ceiling unconstitutional, allowing him to unilaterally raise the debt ceiling.
As was the case during the 2011 and 2013 debt ceiling crises, some Democrats have called upon the White House to go over Congress’ head to raise the debt ceiling. Specifically, they point to Section 4 of the 14th Amendment, which states in part that the “validity of the public debt, authorized by law...shall not be questioned.” Invoking the clause could, theoretically, allow the Treasury Department to effectively ignore the debt ceiling and continue issuing debt. One federal workers union has even secured a May 31 trial for their lawsuit arguing that doing so would be constitutional. However, the Biden administration has expressed reluctance to take this action, with President Biden arguing that litigation over the action could keep it from avoiding a default in time.
2. Five House Republicans could join all 213 House Democrats in signing a discharge petition forcing a vote to increase the debt limit without conditions.
A discharge petition is a procedural tactic in the House that allows a majority of representatives (218 out of 435) to bypass committee approval and bring a bill directly to the floor for a vote. Discharge petitions are rarely successful because they are considered a challenge to the typical committee process and party leadership, and thus often face significant opposition. Additionally, getting five Republican representatives to break ranks to cross House Speaker Kevin McCarthy is unlikely. Even if Democrats succeeded, seven legislative days must pass before the bill can be voted on – this means time is already up if June 1 is indeed the day we run out of cash, as Treasury Secretary Janet Yellen has predicted.
3. The U.S. Treasury could mint a $1 trillion platinum coin to be put on deposit at the Federal Reserve.
In 1997, Congress passed a law empowering the U.S. Treasury to mint platinum coins of any denomination. Before the 2011 debt crisis, someone in the comment section of a blog suggested Treasury could create a $1 trillion platinum coin and deposit it at the Federal Reserve. This would bypass the need for Congress to raise the debt ceiling, as it would increase the Treasury's cash balance, allowing the U.S. government to continue meeting its financial obligations without borrowing more money. The former head of the U.S. Mint, Philip Diehl, has even stated that this can be done. While legally possible, this idea is largely untested and would represent a dramatic departure from conventional fiscal policy.
4. The Congress could simply vote to “suspend” the debt ceiling and let the Treasury borrow whatever it needs for a designated amount of time.
Suspending the U.S. debt ceiling allows the Treasury to borrow as needed to cover the government's bills, bypassing the current ceiling of $31.4 trillion. This has occurred seven times before, with the latest suspension in 2019 lasting for two years. In the present crisis, no significant progress has been observed in talks between President Biden's representatives and congressional Republicans despite the looming default deadline, so a pause could help these negotiations run their course.
If a deal to suspend the debt ceiling is reached between Biden and the Republican House Speaker, McCarthy, it would still need to pass through the House and Senate, which could take a week or longer.
5. President Biden and House Speaker Kevin McCarthy could reach a bipartisan agreement with enough support to pass both chambers of Congress before the default date.
While negotiations between Congress and the White House are currently making little progress, some senior members aren't panicking. "Everybody needs to relax," Senate Minority Leader Mitch McConnell (R-KY) was quoted as saying. "The president and the speaker will reach an agreement. It will ultimately be passed on a bipartisan vote."
Some common ground has already been found in areas like permitting reform for energy projects and the possibility of reclaiming some unused COVID relief funds, which could provide a basis for further negotiations. While it's unlikely a bipartisan bill will be passed before the end of the month, it's not impossible.
If a deal to suspend the debt ceiling is reached, it would still need to pass through the House and Senate, a process that could take a week or longer. Plus, the Senate can filibuster a debt ceiling bill like any other legislation, meaning it would take 60 votes to raise or suspend the limit – in other words, at least nine Senate Republicans would have to back the plan.
