The country is embroiled in its most risky debt ceiling standoff in over a decade, and Treasury officials are working both publicly & behind the scenes to prepare. The US has never defaulted on its obligations, despite Congress sparring over the ceiling.
The so-called X-date, the point at which the Treasury will not be able to make payments on incoming bills on time and in full, is fast approaching — possibly as soon as next month. The United States has never defaulted on its obligations in all of the times that Republicans and Democrats have sparred over the ceiling — instead, negotiators have come to terms and passed legislation to lift the limit.
There are also likely machinations going on behind the scenes in the slim chance that the U.S. does default — a scenario that would send shockwaves through the global financial system. “It’s not like they will have no money, they just won’t have enough, and so they’ll have to figure out what they pay and what story they’ll tell in the capital markets about how soon it will all be fixed,” Van Order said.
Van Order said that officials might also be preparing for other, more out-of-the-box options to avoid default. The concept is predicated upon a broad reading of Section 4 of the amendment, which reads, “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” The idea is that Biden would simply direct the Treasury to issue new debt based on the 14th Amendment, despite lacking congressional authorization to do so.
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