I can’t believe the MSM (Main Lame Stream Media) seems to have totally forgotten the looming debt ceiling crisis. Not that Trump’s legal woes, what’s going on In Tennessee and abortion aren’t important, but a potential US default has catastrophic political and economic consequences for all of us, from the very rich to the very poor (of course it would be worse for the poor as it always is). There’s not even been much coverage of it here at DK aside from Joan McCarter (see below).
So, folks, prepare for an in-depth dive into our looming debt ceiling crisis. “Dive” was probably not a good choice of words as we all gaze over the fiscal cliff, so sorry about that. Anyway, before I get into the four (4) possibilities eluded to in the title, just a quick primer about what debt ceiling is.
It is simply a law passed by Congress setting a limit on how much the US can borrow in order to pay its debts, or bills if you will. These “debts/bills” are for programs or things Congress has already authorized through the passage of Appropriations Bills, both recently and a long time ago. Things like Social Security, Medicare, the Military, Infrastructure and all the other Bills Congress has passed which authorize spending money. It is very important to note that raising the debt limit is about paying existing bills already obligated to us by Congress, and it has nothing to do with any new spending not already appropriated by Congress. In a way, it’s like you or I going to a bank to get a credit extension to pay our existing bills, but not to buy a new car.
According to Treasury Secretary Janet Yellen, the US will reach the debt ceiling previously set by Congress sometime between June and September of this year. Without raising of the debt limit by Congress (or some Executive Order), Treasury will not have the authorized funds to pay any of our debts/bills, causing the US to default on its financial obligations.
So as this fiscal cliff approaches, let’s look at our options:
1. Just Default —
This is basically the “Do Nothing” option. Actually, it’s not really an “option”, it’s more of a consequence.
What happens if we default on some or all of our debts?
No one really knows for sure because its never happened before. We would be in uncharted waters. One thing that will most certainly happen is the US Credit Rating would be downgraded on the world markets, which would possibly make it more difficult for the US to borrow money, and certainly more expensive in terms of interest rates, thereby increasing our debt. This could happen even before Default Day if world markets decide we are unlikely to avoid going over the fiscal cliff.
While economic experts differ on exactly what will happen, all agree it would be bad REAL BAD for all of us, including the upper 1% Wall Street types and Big Corporations. The prospect of their very rich friends losing substantial amounts of money has to have some Republicans scared of a default and wanting to avoid it. Although some House Republicans have suggested that Treasury could continue to pay some of our debts to avoid a complete default, none have laid out a plan to do so, and Treasury has said such partial payment is logistically impossible. Even if it were possible, the prospect of continuing to pay our foreign debts to countries like China, while not issuing Social Security checks to US retirees, would be politically suicidal for Republicans.
So in a nutshell, Default is Not an Option!
2. Republicans or Democrats Cave —
Let’s start with Republicans, or more specifically House Republicans. This would mean that Speaker McCarthy would have to put a Clean (no strings attached) Debt Ceiling Raise Bill on the House Floor. While such a Bill could get enough Republicans together with Democrats to pass, it would be political suicide for McCarthy. The GOP House Crazy Caucus would have his political hide and he knows it. They would certainly call for a “motion to vacate,” which is a privileged resolution that takes priority over anything else pending on the floor and must receive a vote on whether to remove McCarthy’s hand from the Speaker’s gavel. Since this gavel is something he endured 15 separate and embarrassing votes to get and has been his #1 goal in life, there is no way he will risk giving it up. He knows there is no way he would survive a vote to remove him from the Speakership without some help from House Democrats, and there is virtually no chance that Democrats would want to help McCarthy since he has treated them like crap since day one. So a House Republican cave is very unlikely, if not impossible.
What about a Democrat cave? That would mean agreeing to whatever the House GOP wants in order to pass a debt ceiling raise bill. There are two substantial problems with this.
First, it would likely mean substantial cuts in a number of popular programs. Basically, massive cuts in all programs except the Military. It would likely defund most or all the Biden spending authorized through the COVID Relief Bill, Infrastructure Bill and ironically, the Deficit Reduction Act. It would basically do away with the entire previously passed Biden spending agenda. No way should Democrats agree to such draconian cuts. It would be political suicide for them.
But, there is a second problem. That being that so far, House Republicans have not decided on what they want Democrats to cave to. They have not yet agreed amongst themselves on what demands, in terms of spending cuts, they want to put forth. In other words, they haven’t picked the hostages they will threaten to shoot. In fact, as pointed out in this Joan McCarter Post it has devolved into a bitter internal dispute:
A report in The New York Times last week started the latest brouhaha, in which McCarthy has been telling GOP members that he thinks Republican Rep. Joey Arrington of Texas, chair of the Budget Committee, is incompetent and not up to the job. He has also been telling people that Republican Majority Leader Steve Scalise of Louisiana is unreliable, “ineffective, checked out and reluctant to take a position on anything.”
Pass the popcorn, please!
For McCarthy to get a series of cuts into a debt ceiling raise bill that his caucus will all vote for seems highly unlikely at this time. Even if he does, you can bet it will come with way more spending cut strings than Democrats could possibly accept, making it difficult if not impossible to pass in the Democrat controlled Senate.
So let’s consider a cave by either side or any compromise bill both sides would accept, as an impossibility at this point.
Also, I don’t see a compromise bill with Biden that includes a few moderate spending cuts as possible either. Should McCarthy put such a Bill on the floor, the members of the GOP Crazy Caucus would still call for a vote to oust him from the Speaker’s Chair. So a “deal” with McCarthy seems unlikely since there are no signs he wants to step down. .
3. Discharge Petition —
Rather than me trying to explain this, here are some excellent excerpts from this recent Joan McCarter Post that I hope she won’t mind me using:
That’s got people talking again about one potential way for House Democrats to step in and save the day—using a discharge petition to pass a clean debt ceiling solution. Democratic Sen. Chris Van Hollen of Maryland, who served as Budget Committee chair when he was in the House, tells the NYT that House Democrats should start the process now. “I do think it is important to lay the groundwork for a discharge petition because it is a complicated process, so you need to plan ahead—meaning now,” he said.
It should be noted that a Discharge Petition is something exclusive to the House, so Senator Van Hollen has no direct role in it.
Yes, the key is planning ahead, and if this were to be a truly viable plan that planning would have happened a couple of months ago. This legislative trick bypasses House leadership and the Rules committee to force a vote on a bill that the majority of the House—218 members—agrees upon. That’s the first problem—Democrats would need five Republicans willing to buck their party and agree to it. Then there are more hurdles, most of which involve time. It takes 30 legislative days—days when the House is in session—after it’s introduced before backers could even start getting the 218 signatures on it to force it out of committee and to the floor. Even then, there are another nine legislative days on the front end after the bill has been successfully discharged before it can be considered.
As of now, the debt limit could be hit any time between June and September, depending on revenues from this tax season and other factors. And as of now, there are just 44 legislative days scheduled in the House between now and Aug. 1, with all of August and nearly half of September scheduled for recess. That leaves very little wiggle room—just five days—for this option to work. Five days that McCarthy and team could easily take away through various other procedural maneuvers.
So I think the good news here is that I have heard rumors that are some House Republicans who would be willing to sign a Discharge Petition if they feel that it is the only alterative to avoid default. Maybe 5 or more. The bad news is the clock is ticking, and McCarthy controls the clock in terms of when the House is in session and when it is on recess. Depending on when Default Day actually comes, which nobody knows, it seems ever likely that getting a bill to the House floor via a Discharge Petition, getting it passed by both the House and Senate, and signed by the President will not happen in time to avoid default.
The time to start the Discharge Petition process was probably January, which could have provided enough time to get a bill passed regardless of how McCarthy manipulated the House session. Why Democrats didn’t start the process then by introducing a clean Bill in Committee and start gathering Dem. signatures remains a mystery to me. Perhaps they naively thought a deal with McCarthy was possible. Perhaps they thought they could never get 5 House Republicans to sign on. I have no idea what they (House Dems.) were thinking. But it would have been prudent to have started it as a backup plan (Plan B) to avoid default.
Still, as Joan points out below, it’s something that still should be attempted:
Van Hollen concedes that even if it is introduced the first day members are back from their current recess, April 17, lawmakers couldn’t start getting signatures until June 21. Given the slim chances for this to work, there still might be some value to Democrats trying it. It would be a chance for Democrats to demonstrate just how intractable the GOP is on saving the global economy by keeping the U.S. from defaulting on its debt—they have to be forced to do it. That is if five Republicans who want to avoid disaster can even be mustered.
It theoretically could put more pressure on a fracturing GOP, if Democrats were able to peel some Republicans away. It would certainly highlight the fact that McCarthy and team are continuing to flail, without any solution of their own to get out of the mess.
It’s a highly unlikely option for solving the debt crisis problem, but it is probably still worth putting out there.
I agree! One of my own favorite saying in politics is:
Sometimes there is value in failure.
This may be one of those times. Also, it could work in conjunction with Option #4 that follows.
4. DARK BRANDON To The Rescue —
This is where President Biden plays the 14th Amendment card. As you may know, Section 4 of the 14th Amendment of the Constitution reads:
The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.
I have highlighted what I think are the two key phrases in this amendment. One being “authorized by law” meaning all debts (I.e., spending) authorized by Congress via the passage of Appropriations Bills. The other being “shall not be questioned” meaning, in my opinion and the opinions of a number of Constitutional Scholars, that no one shall question the ability of the United States to pay all its debts, nor interfere with its obligation to pay such debts.
So referencing the 14th amendment and its above described meaning, President Biden signs an Executive Order on the eve of Default Day authorizing the Treasury to borrow as much money as necessary to cover all US debts/bills until such time as Congress raises or eliminates the debt ceiling. Also, Biden should do it in a BIG way. He should go on prime time, national TV and explain the Executive Order to the American people. He should explain the 14th amendment and how it authorizes and obligates him to take this Executive action. In a nutshell he should explain what most of us already know. That is when a law passed by Congress (the debt limit law) conflicts with the Constitution (the 14th amendment), the Constitution governs. Also, he should explain the dire fiscal consequences for all Americans if he didn’t act.
This will buy time for the House to process a Discharge Petition if it so chooses, or for the issue to be resolved through the 2024 elections (Democrats hold the Presidency, Senate and retake the majority in the House), without fiscal disaster in the interim.
While, the Republicans in the Crazy Caucus will scream and holler, I suspect many Big Business friendly Republicans will be quietly pleased that Biden has avoided this fiscal train wreck. None more quietly pleased perhaps than Kevin McCarthy since this would get him off the hook with the Crazy Caucus. Outwardly he can join his crazies in condemning Biden, while being quietly grateful to Biden for helping avoid a “motion to vacate” vote and retain his Speakership.
So as should be obvious to everyone, Option #4 sounds like our best option both economically and politically.
DARK BRANDON SAVES THE DAY!
But before I sign off here, a couple of postscripts with regard to Option #4 if you don’t mind.
First, it’s certainly possible that some group of Republicans could bring legal action against the Biden administration that gets all the way to the Supreme Court. They will argue that Biden has overstepped his Constitutional authority and has wrongly interpreted the 14th amendment. But aside from taking months to go through the Federal legal system, SCOTUS will have to decide whether a decision against President Biden is worth plunging the US into an immediate default. Remember, many of the GOP justices are friends of the very rich and Corporate elites, who certainly don’t want a fiscal disaster that will make them poorer. So I don’t see SCOTUS pushing us over the fiscal cliff.
Second, yes it’s true that we will face another standoff at the end of the Federal fiscal year (September 30). One that could shutdown the government and which Biden can’t solve with an Executive Order. However, I will leave that for another diary. Perhaps it’s not too early to start a Discharge Petition for a Continuing Resolution to get us over this fiscal obstacle.