In battle with federal employee union, Biden fights to preserve the debt ceiling

A federal employee union is moving forward in its efforts to permanently remove the possibility of missed paychecks for its members due to a government default, though the Biden administration—after narrowly avoiding a debt crisis earlier this year—is looking to have the case dismissed as no longer relevant. 

President 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 last month 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 federal court, however, the Biden administration is fighting a lawsuit looking to accomplish exactly that. Federal employees are still facing the prospect of delayed paychecks when the debt ceiling is reinstated in 2025, the National Association of Government Employees said in its lawsuit, and the entire construct remains unconstitutional. A federal judge was set to hear arguments on the case in May, but canceled the hearing when Biden and lawmakers announced a deal that ultimately became the Fiscal Responsibility Act. 

The Justice Department asked Judge Richard Stearns of the U.S. District Court for the District of Massachusetts to dismiss the case, suggesting the FRA has made the case moot and NAGE members lack standing because their claims are “wholly speculative.” Their concerns depend on a “future chain of events that may never occur,” Justice said, and the agreement between Biden and congressional Republicans further demonstrates the likelihood of a default is small. Further, it argued, the federal circuit has previously ruled a future debt ceiling threat does not convey standing to anyone. 

In a filing this week, NAGE said its case is exempt from normal mootness limitations because the Biden administration has agreed only temporarily to enforce spending laws and will once again be required to ignore them in January 2025. Further, the union said, the same issue “has arisen again and again,” and in each case there is insufficient time to litigate the matter. 

The administration’s decision to fight the case appears to be, to some degree, a reversal. 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 is seeking to have it dismissed. The Justice Department declined to weigh 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 federal attorneys said. “Whether or not plaintiff had standing at the time the suit was filed, the case is now moot.”

Wyn Hornbuckle, a spokesman for Justice, said the department does not comment on ongoing litigation. Attorneys for NAGE also declined to comment on the case. 

NAGE has 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. NAGE members have standing, the union said, because the Biden administration was on the precipice of implementing emergency measures that would have delayed pay for federal employees and is set to do so again in 2025. 

The administration said any potential hardship for federal employees was too distant for the court to require a ruling from the court. 

“Any possible political dispute over the debt limit in 2025 is, at the present, far too uncertain to have this court resolve plaintiff’s claims regarding the potential delay in paychecks for federal workers or the temporary suspension of matching contributions to their retirement plans in the event of a future debt limit impasse,” the Justice attorneys said.

NAGE said its members have already suffered during the previous debt ceiling standoff, noting 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. While the government has always promised to make federal employees and retirees whole when invoking those steps, the union argued its members already endured real losses when they lost the interest that would have occurred during that time.

The government countered that because it is required to make those funds whole, it has no impact on the union’s members. 

The court will hold a hearing on the motion to dismiss the case on Aug. 29.