The United States could be in bankruptcy in early June, if no agreement is reached between Democrats and Republicans on raising the debt ceilingwarned the Congressional Budget Office (CBO) this Friday.

But Joe Biden has a way out, it is the 14th amendment of the Constitution which can be a norm that can be referred to in order to prevent his non-payment of obligations, i.e. the inability to pay creditors, in the absence of a political agreement on raising the debt ceiling.

The 14th Amendment, added in 1868 to the US Constitution, stipulates that “the validity of the public debt of the United States, authorized by law, (…) shall not be questioned.” In other words, already voted expenses must be able to pay.

The clause was written to address divisions after the bloody Civil War, which raised fears of a repudiation of the federal debt by Southern lawmakers returned to Congress after defeat, said Robert Hockett, a law professor at Cornell University.

The provision on the debt ceiling was later added to this text in 1917. According to some experts, the 14th Amendment makes the debt limit unconstitutional.

Invoking the 14th Amendment could lead to litigation, but failure to do so also carries risks.

If the Treasury Department runs out of credit to meet its obligations and ends up delaying certain payments, creditors have a “perfectly valid legal claim,” according to Neil Buchanan, a law professor at the University of Florida.

why the controversy

Raising the debt limit, a congressional mandate, is usually a routine process, but it has become contentious as Republican lawmakers demand that the Democratic president cut spending in exchange for an increase.

CBO, the politically independent agency responsible for providing fiscal and economic analysis to Congress, had previously estimated that this would likely happen between July and September.

For its part, the Ministry of Finance has already mentioned the date of June 1 for the possible bankruptcy of the world’s largest economy, which is an unprecedented situation.

According to the CBO forecast, “if the debt limit remains unchanged, there is a significant risk that at some point in the first two weeks of June, the government will no longer be able to pay all of its obligations.”

“The Treasury’s ability to fund ongoing government operations will remain uncertain through May, even if the Treasury finally runs out of funds in early June,” he said.

The CBO notes that “additional emergency measures” and tax receipts at the end of the quarter could allow the government “to fund its operations at least through the end of July.”

How much is the US debt

The debt of the world’s largest economy reached 31 billion dollars on January 19. a figure above which the country can no longer issue new loans to finance itself.

Temporary emergency measures have been taken to continue payments.

Democrats and Republicans are at odds on this issue. and currently the Republican opposition refuses to raise the debt ceiling without concessions. A meeting between President Joe Biden and Republican leaders in Congress is scheduled for early next week at the White House.

“If the borrowing limit is not lifted or suspended, the Treasury Department would not be authorized to issue additional debt,” the CBO detailed.

That would result in “delayed payments for certain government activities, a default on government debt obligations, or both,” said the CBO, which estimates a potentially catastrophic effect on the global economy.

“Such actions could lead to problems in credit markets, disruptions in economic activity and a rapid increase in interest rates for the Treasury,” the report said.