Union Lawsuit Wants Biden, Yellen to Ignore Debt Limit

A union of government employees Monday sued Treasury Secretary Janet Yellen and President Joe Biden to try to stop them from complying with the law that limits the government's total debt, which the lawsuit contends is unconstitutional.

The lawsuit comes just weeks before Yellen has warned that the government could default on the federal debt if Congress fails to raise the borrowing limit by then. Financial markets have been increasingly nervous about the potential for default, with economists warning that a failure to raise the debt limit could trigger a global financial crisis.

The lawsuit, filed by the National Association of Government Employees, says that if Yellen abides by the debt limit once it becomes binding, possibly next month, she would have to choose which federal obligations to actually pay once the debt limit bars the government from further borrowing. Doing so, the lawsuit contends, would violate the Constitution's separation of powers.

Some analysts have argued that in that case, the government could prioritize interest payments on Treasury securities. That would ensure that the United States wouldn't default on its securities, which have long been regarded as the safest investments in the world and are vital to global financial transactions.