FirstFT: US faces ‘constitutional crisis’ over debt limit impasse, Yellen warns

US Treasury secretary Janet Yellen has warned of a “constitutional crisis” that risks economic and financial disaster if Congress does not increase the federal debt limit, with the government in danger of running out of cash in the absence of new borrowing capacity.

Her comments came as President Joe Biden prepared to meet congressional leaders in the White House for talks to break the fiscal impasse over lifting the debt ceiling, which Yellen has said could be breached as early as June 1.

“If Congress fails to meet its responsibility, there are simply no good options,” she said in an interview on ABC’s This Week on Sunday. Biden administration officials have considered whether they could invoke the 14th amendment of the US Constitution to continue issuing new debt to pay social security recipients, bondholders, government employees and others without legislative approval.

A clause in the amendment states that “the validity of the public debt of the United States, authorised by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned”. Economists and constitutional experts are divided over whether circumventing Congress in this way would be legal.

The US “should not get to the point where we need to consider whether the president can go on issuing debt. This would be a constitutional crisis,” Yellen said.

Asked whether Biden would invoke the 14th amendment, Yellen said she did not yet want to consider emergency options, but using the clause would be “among the not-good options”. Raising the debt ceiling was Congress’s job, she added.

Here’s what else I’m keeping tabs on:

  • WTO: The World Trade Organization’s May General Council meeting begins in Geneva.

  • Germany: The European economic powerhouse releases March industrial production figures.

  • UK: Financial markets are closed for a public holiday after the weekend coronation of King Charles III.

Five more top stories

An oil refinery in Moscow
Russian oil and gas tax revenue fell 45% in the first quarter of 2023 © Maxim Shipenkov/EPA-EFE/Shutterstock/Bloomberg

1. The price cap on Russian oil exports has forced the Kremlin to raise the tax burden on producers, further undermining an energy sector already reeling under the pressure caused by western sanctions, officials from the G7-led coalition have told the FT.

2. The slow rebound in China dragged on western companies’ profits, after the country’s sudden reopening from pandemic curbs prompted over-optimistic growth forecasts.

3. Ukraine nuclear safety fears have increased after Russia started evacuating hundreds of civilians from occupied areas in south-eastern Ukraine, including families with children from a town housing workers at Europe’s largest nuclear power plant.

4. The chief of Anheuser-Busch InBev has blamed social media and misinformation for stoking a conservative boycott of Bud Light after the bestselling US beer was promoted by a transgender influencer. The boycott led sales volumes of the beer to drop by a quarter.

5. Arab states have agreed to readmit Syria into the Arab League more than a decade after its membership was suspended following President Bashar al-Assad’s brutal crackdown against a popular uprising.

The Big Read

ExxonMobil logo
Few outside Exxon believe it is really transforming its business © FT Montage/Getty Images/Dreamstime

ExxonMobil, the energy major most dedicated to oil production, seems to be turning over a green new leaf, making new commitments to clean energy and reorganising internally under pressure from activist shareholders. But few outside Exxon believe it is really transforming its business, and its feints towards a green transition illustrate the range of pressures that American oil companies are under.

We’re also reading . . . 

Chart of the day

A two-year rally in US oil and gas stocks is coming to a halt as falling crude prices and fears of a slowdown in the world’s biggest economy threaten producers’ ability to maintain bumper shareholder payouts.

Line chart of Index value change (%), rebased showing US oil stocks have trailed the market this year

Hear Hillary Clinton live in conversation with the FT’s US national editor Edward Luce on May 20 at our FTWeekend Festival. Register now and get $20 off as a newsletter subscriber with the promotion code NewslettersxFestival at ft.com/festival-us.

Take a break from the news

The view from a room balcony at the Belmond Hotel Splendido
The view from a room balcony at the Belmond Hotel Splendido in Portofino, Italy

Take a tour of four grand hotels that have benefited from a “glow up” and much-appreciated makeovers. From Santa Monica in California to Portofino on the Italian Riviera, what’s old is new again.

Additional contributions by Gary Jones and Annie Jonas