One element of that secret deal Kevin McCarthy made with the Freedom Caucus for his speakership has emerged, and it is absolutely bonkers. The plan is to allow the debt ceiling to be breached, and then to direct the Treasury Department on how to prioritize debt payments. The GOP has been promising since before last fall’s midterm election that they would make debt ceiling a fight, and would demand those cuts. They followed through with new House rules to reinforce that. What they hadn’t said out loud was that they were willing to do the unthinkable: Force a debt ceiling breach.
The debt ceiling is a congressionally imposed limit on the level of debt that the federal government can assume. (It’s currently $31.4 trillion.) That limit is purely a construct of Congress, implemented in 1917 to make responding to WWI needs simpler. Prior to that, the executive had to go to Congress to authorize specific loans or to allow the Treasury to issue certain debt instruments and individual debt issues for specific purposes. Imposing the debt ceiling was a way of allowing Treasury the flexibility to issue bonds and take on debt as it needed to in the war, up to a limit. Since 1917, the debt ceiling has never been breached.
Now the GOP wants to do it, but supposedly with a plan. (Because if the maniacs are known for anything, it’s their planning ability. Apart from Jan. 6.) The Washington Post broke the story of these talks Friday, reporting that six sources involved in negotiations confirm that McCarthy agreed to pass a payment prioritization bill in the next few months.
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According to those sources, “the GOP proposal would call on the Biden administration to make only the most critical federal payments if the Treasury Department comes up against the statutory limit on what it can legally borrow.” The payments would include interest payments on the debt, and possibly “Social Security, Medicare and veterans benefits, as well as funding the military, two of the people said.”
Which would leave everything else hanging while the federal government no longer had the power to borrow to fund programs that Congress has already authorized. It’s a government shutdown combined with a global economic panic because the U.S. had finally done the thing that had never happened before. “Economists warn that not raising the debt limit could cause the United States to default, sparking a major panic on Wall Street and leading to millions of job losses,” the Post reminds us. A “prioritization plan” from a bunch of maniacs pretending like they’re in control of anything wouldn’t do much to avert that panic.
Prioritizing servicing the interest payments over running the government is not a good look for the GOP. “Any plan to pay bondholders but not fund school lunches or the FAA or food safety or XYZ is just target practice for us,” one senior Democratic aide told the Post. But there’s no indication that this crop of House GOP leadership actually gives a damn about the politics of it. They are all in safe seats and the fact that the minority is tiny and dependent on a bunch of vulnerable members doesn’t deter them.
A larger problem for the nation is reality: We were here before in 2011 and 2013 and the Treasury Department was very clear in explaining that it doesn’t work that way—you can’t juggle the payments around when you are making literally millions of separate payments every single day. Then-Treasury Secretary Jack Lew explained that the computer systems that issue those tens of millions of payments simply can’t be updated and reshuffled on an emergency basis, and that “prioritization is just default by another name.”
Not that reality means much to the maniacs, either. Maybe Neil Bradley, executive vice president of the U.S. Chamber of Commerce, could have some sway with them. “Prioritization doesn’t work. We had this discussion a decade ago,” Bradley said. “If the U.S. government skips its payments to America’s seniors or skips its payments to bondholders, both of those things call into question the full faith and credit of the United States government and our commitment to paying our bills. And both of them have pretty catastrophic economic consequences.”
The White House and Democrats remain firm in rejecting all this. “We’re not going to do any negotiations. And it should be, again, done without conditions,” White House Press Secretary Karine Jean-Pierre told reporters Friday.
Senate Majority Leader Chuck Schumer and House Democratic Leader Hakeem Jeffries issued a joint statement writing that a “default forced by extreme MAGA Republicans could plunge the country into a deep recession and lead to even higher costs for America’s working families on everything from mortgages and car loans to credit card interest rates.”
One House Republican, Rep. Brian Fitzpatrick, is opposed to this whole plan. He’s co-chair of the bipartisan Problem Solvers Caucus. “I will tell you that we will not allow our country to default on our debt,” he said. “The full faith and credit of the United States is what gives us the position we hold in the world. So that’s off the table. We’re not going to default. We cannot allow ourselves to default.” He and fellow chair Rep. Josh Gottheimer are looking at alternatives, which include negotiating budget cuts. Democratic leadership says it won’t do that.
One of the things they’ll be looking at is a discharge petition, the way House members can force legislation out of committee and onto the floor bypassing opposition from leadership. That process is loaded with landmines, the first being it could take too much time to achieve—at a minimum nearly three months without GOP leadership playing dirty tricks to slow it down.
Treasury Secretary Janet Yellen informed Congress on Friday that the department will begin its extraordinary measures—the payment shuffling it can do on a short-term basis to avoid default—this week, and estimated that those measures will only last until early June. That means that members need to organize a discharge petition immediately to have any prayer of it working, and organizing it is a whole other ball of wax.
Democrats continue to talk tough. “Once it becomes acceptable to threaten the burn down the entire economy unless you get your partisan agenda enacted, it’s all over,” Sen. Chris Murphy tweeted Monday, not specifying exactly what is “all over.” Preferably, that would be the debt ceiling as a hostage to take.
The president has options for doing that. It’s time he uses them.