FirstFT: Yellen warns of debt ceiling ‘constitutional crisis’

US Treasury secretary Janet Yellen has warned of a “constitutional crisis” if Congress does not raise the federal debt limit, as the government remains in danger of running out of cash in the absence of new borrowing capacity.

The White House and Republican lawmakers are in a deadlock over lifting the debt ceiling, which Yellen has said could be breached as early as June 1.

The Biden administration has 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, however, are split over whether sidestepping Congress in this way would be legal.

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:

• Japan-Korea visit: Japanese prime minister Fumio Kishida meets South Korean president Yoon Suk Yeol today in the first summit between the two nations in a decade.

• FTX scandal: Lawyers for FTX founder Sam Bankman-Fried will have until today to file court motions in New York to formally respond to the criminal fraud charges brought against him by federal prosecutors.

• Coronation: Financial markets in the UK are closed for public holiday today after the coronation of King Charles III.

Five more top stories

1. US states are accelerating an arms race of tax breaks and deal sweeteners as they aggressively court foreign investors drawn to America by Joe Biden’s clean energy and chips subsidies

2. Warren Buffett’s Berkshire Hathaway has sold billions of dollars of US stocks, a signal the famed investor saw little appeal in a volatile market.

3. Russia has started a partial evacuation from southern Ukraine, raising fresh concerns about its safety.

4. Western companies warn of a hit from China’s slow recovery, after the country’s sudden reopening from pandemic restrictions prompted over-optimistic growth forecasts.

5. China holds security and trade talks with the Taliban, as Beijing looks to boost investment in the crisis-hit country.

The Big Read

Following leads from cyber security researchers who study hacker forums for a living, the Financial Times observed over two weeks several chat groups hosting tens of thousands of pages of documents, sometimes freshly harvested from recent security breaches, sometimes consisting of repackaged nuggets from previous hacks. Take a look inside the online marketplace for US secrets.

We’re also reading and listening to . . . 

• AI regulation: Artificial intelligence systems can be of enormous benefit to society. But the superintelligent technology needs superintelligent regulation — and fast, writes the FT’s editorial board.

• India’s economic miracle: In the southern state of Karnataka, a new economic miracle is unfolding in a vibrant local democracy, writes Ruchir Sharma, chair of Rockefeller International.

• FT Weekend podcast 🎧: This week, host Lilah Raptopoulos speaks to a longtime palliative care nurse on what we owe the people who help us die.

Chart of the day

Progressives are winning the immigration debate in western countries, with some theorising that the success of anti-immigration populism shocked previously complacent moderates into vocalising support for diversity, writes chief data reporter John Burn-Murdoch.

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

Pete Betts, one of the world’s most experienced environmental negotiators, has only months to live. Still hopeful about the planet, he tells Pilita Clark the 13 lessons he wants to leave behind.

Additional contributions by Tee Zhuo and Emily Goldberg