A union of government employees on Monday sued Treasury Secretary Janet Yellen and President Joe Biden to try to stop them from complying with the law that limits the government’s total debt, which the lawsuit contends is unconstitutional.
The lawsuit comes just weeks before Yellen has warned that the government could default on the federal debt if Congress fails to raise the borrowing limit by then. Financial markets have been increasingly nervous about the potential for default, with economists warning that a failure to raise the debt limit could trigger a global financial crisis.
The lawsuit, filed by the National Association of Government Employees, says that if Yellen abides by the debt limit once it becomes binding, possibly next month, she would have to choose which federal obligations to actually pay once the debt limit bars the government from further borrowing. Doing so, the lawsuit contends, would violate the Constitution’s separation of powers.
Some analysts have argued that in that case, the government could prioritize interest payments on Treasury securities. That would ensure that the United States wouldn’t default on its securities, which have long been regarded as the safest investments in the world and are vital to global financial transactions.
But under the Constitution, the lawsuit argues, the president and Treasury secretary have no authority to decide which payments to make because the Constitution grants spending power to Congress.
“Nothing in the Constitution or any judicial decision interpreting the Constitution,” the lawsuit states, “allows Congress to leave unchecked discretion to the President to exercise the spending power vested in the legislative branch by canceling, suspending, or refusing to carry out spending already approved by Congress.”
The NAGE represents 75,000 government employees that it says are at risk of being laid off or losing pay and benefits should Congress fail to raise the debt ceiling. The debt limit, currently $31.4 trillion, was reached in January. But Yellen has since used various accounting measures to avoid breaching it.
Last week, Yellen warned that the debt limit would become binding as early as June 1, much earlier than many analyses had previously predicted, because tax receipts have come in lower than projected. Republicans in Congress have refused to vote to raise the debt limit unless Biden and congressional Democrats agree to deep spending cuts.
On Sunday, Yellen said there were “no good options” for the United States to avoid an economic “calamity” if the debt ceiling isn’t raised. Biden is scheduled to meet with the top Republicans and Democrats in Congress on Tuesday to discuss a potential breakthrough.
