U.S. Could Run Out of Cash by June 1, Yellen Warns
It&#x27;s unlikely the House will pass a clean debt ceiling hike. The GOP has not budged since the beginning of the new Congress. The MAGA caucus is determined to extract spending cuts at any costs. The way I see it, one of three things will happen:<p>1) The executive branch will invoke Section 4 of the 14th Amendment[1] and direct, by Executive Order, the Treasury Department to continue paying interest to bondholders, effectively abolishing the debt ceiling with the stroke of a pen, and without Congress&#x27; approval. This is my preferred option. There already exists a strong legal argument that the existence of the debt ceiling is unconstitutional. This maneuver would allow the White House and Congress to fight the issue in the courts without defaulting. The administration could also mint the oft-discussed trillion dollar coin, or a couple of them, if that loophole still exists.<p>2) A few sane House Republicans will cross party lines and vote for a clean debt ceiling hike with the Democrats. The Speaker would not be able to prevent it, and what happens to Kevin McCarthy doesn&#x27;t matter here. Democrats can introduce a bill and force a floor vote without the Speaker&#x27;s approval (?) Someone correct me on this.<p>3) Default. Either the US government stops paying bondholders, or the Fed buys bonds in default (this is called a technical default), or the Treasury keeps paying interest but slashes spending in other areas, like Medicare, to pay for it. However, there are serious doubts as to whether this &quot;debt prioritization&quot; maneuver would be legal and&#x2F;or constitutional.<p>Or the administration could cave and give the Republicans what they want, but I don&#x27;t see that happening, because it would greatly harm Biden&#x27;s reelection chances and hand a huge political victory to the GOP.<p>[1] 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.