US debt ceiling: Biden is caught between a rock and a hard place

US President Joe Biden is facing one of the toughest challenges of his political career as the nation's debt ceiling negotiations enter a new phase of deadlock with Republicans.

If American policymakers cannot reach an agreement on raising the debt ceiling within the next week, the US economy will be forced to default on its debt.

The clock is ticking for the US economy, businesses, and Washington's reputation around the world.

Treasury Secretary Janet Yellen has warned Congress that the US has enough money to last until June 1. She is trying to postpone a default and give the government a little breathing room until mid-June, when the government expects to collect a significant amount of quarterly tax revenue.

The House caucus in Congress opposes this approach, arguing that the US spends $100 billion more than federal tax revenue each month.

Currently, US national debt has surpassed $31.4 trillion, which means that every American citizen owes over $91,000.

Deadlock in negotiations

Biden and House Speaker Kevin McCarthy's Monday attempt to break the partisan deadlock and prevent the US economy from falling off the cliff failed again.

Following the groundbreaking meeting, both sides agreed on two things: talks were “productive” and “there was no deal”.

Earlier, Biden said that the government has offered $1 trillion in spending cuts, but GOP lawmakers have refused to agree.

Republicans have asked the Biden administration to cut federal government spending that will affect the next few years in exchange for raising the debt limit. The White House has blamed the opposition for proposing extreme spending cuts.

The Republican side green-lights military spending and investments but opposes spending in non-defence areas. The White House, however, insists on keeping both military spending and other areas, such as education, scientific research, and environmental protection.

Any disagreement between the two sides will put the Biden administration in a difficult position with the American people. This could lead businesses to decide on major job cuts, as the government aims to boost employment amid rising inflation.

Biden has already said that the GOP aims to portray him as weak and vulnerable in US politics, as he is a candidate for the 2024 presidential election, which will be a litmus test for him.

Invoking 14th Amendment

The US president has the option to invoke the 14th Amendment to avert a crisis that is expected to prompt Republicans to start a legal battle over his authority in Washington.

Although the 14th Amendment does not specifically mention the debt ceiling, some scholars have asserted that a broad interpretation of the language could give the president the right to lift the borrowing cap without an act of Congress.

Proponents of the idea argue that default is unconstitutional and the President has the right to nullify the debt limit if Congress fails to raise it.

GOP lawmakers have already announced that they are against any usage of this unproven theory but Biden said that he “thinks" that he has the authority to invoke the 14th Amendment on the debt ceiling.

Earlier, Treasury Secretary Janet Yellen warned that using the debt limit could trigger a "constitutional crisis." She called it "one of the not-good options" if Congress failed to act.

If there is no deal, the US will go bankrupt. Financial markets are likely to see more red arrows showing down on indexes, losses on stocks, and massive layoffs.

If invoking the 14th Amendment gets stuck in the court, the government could default anyway.

Separately, chaos may engulf US state institutions over legal challenges that will lead to partisan gridlock and there will be no cooperation in future legislations.

Biden administration may also have to make concessions to reach a deal, which could mean falling short of promises.