Court sides with Biden administration in dismissing federal employee union’s effort to eradicate debt default threat

A federal court has dismissed a bid from a federal employee union that sought to permanently end the threat of debt defaults by the U.S. government, saying the group of civil servants no longer has standing after a deal punted the next deadline into 2025. 

The National Association of Government Employees brought the case to protect its members from potential default scenarios in which they would likely not receive their paychecks on time. The group initially filed the lawsuit in the run up to the near default earlier this year, which was ultimately avoided at the 11th hour after President Biden signed the Fiscal Responsibility Act into law. 

The Biden administration fought the case and the Justice Department asked Judge Richard Stearns of the U.S. District Court for the District of Massachusetts to dismiss it, despite the president’s previous denouncements of the debt ceiling and his statements that he would seek to eliminate it. 

Stearns sided with the administration, saying NAGE’s case was too theoretical after the immediate threat that existed when it first filed the case earlier this year subsided. He rejected the union’s argument that its members already suffered harm when the Treasury Department suspended investments into the Thrift Savings Plan’s government securities (G) fund earlier in the year as part of its “extraordinary measures” to buy lawmakers more time until a default occurred. The government is required to make federal employees and retirees whole when invoking those steps, leading Stearns to conclude any alleged past or future harm resulting from them to not amount to any actual injury. He similarly dismissed any standing that would result from future salary withholdings during a potential future default. 

He asserted no opinion on whether NAGE ever had any standing to bring its case, but even if it did at the time of its filing, he said, “the underlying issue can no longer be considered ‘real’ or ‘immediate’ given passage of the Fiscal Responsibility Act.” 

The judge rejected NAGE’s argument that the union would not have sufficient time to litigate the constitutionality of the debt ceiling while a default was actively occurring. He added the group failed to demonstrate it would face harm in the future, noting only the threat of future harm was guaranteed. 

“Congress has consistently suspended enforcement of or raised the amount of the debt ceiling limit before any separation of powers violation has crystallized when faced with the issue in the past,” said Stearns, a President Clinton appointee. 

Federal employees are still facing the prospect of delayed paychecks when the debt ceiling is reinstated in 2025, NAGE had argued in its lawsuit, and the entire construct remains unconstitutional.

Biden has said he wants to avoid future showdowns over the debt ceiling, which threaten to upend government operations and force federal employees to work indefinitely without pay. He formed a working group earlier this year to come up with solutions that would avert political standoffs with deficit hawks in Congress and has expressed an openness to pursuing litigation that would permanently strike down the debt ceiling.

In May, before he struck his deal with Republicans, Biden said the immediate crisis required congressional action but suggested he could take a different approach after its resolution. 

“My hope and intention is when we resolve this problem, I’d find a rationale to take it to the courts to see whether or not the 14th Amendment is, in fact, something that would be able to stop it,” Biden said.

Rather than use the existing case as a means to that end, however, the administration sought to have it dismissed. Justice never weighed in further on the merits of the case, reducing its argument only to the union’s lack of standing.

“As with every prior debt limit impasse, the political branches reached an agreement to address the debt limit,” the department’s attorneys said. “Whether or not plaintiff had standing at the time the suit was filed, the case is now moot.”

NAGE argued the debt ceiling should not stand for several reasons. Congress sets funding priorities, the union said, and a default scenario that requires the president to pay down some obligations and not others undermines that constitutional structure. Complying with the debt ceiling is inherently unconstitutional, therefore, unless and until Congress sets a roadmap for the exact spending schedules during a default.

Similarly, the union argued, the president cannot simply cease making all payments during a default because the 14th Amendment to the Constitution prohibits the government from failing to pay its debts. The debt ceiling could place President Biden in an “impossible position,” it added, without legislative permission or constitutional authority for proceeding.