On an August afternoon nearly twelve years ago, Vice-President Joe Biden strode out of a meeting with the House Democratic Caucus to speak to reporters. “If we had our way, and there was a different circumstance in the Congress, we would be talking, and should be talking, right now about job-creation issues,” he said. “But there is a sort of Sword of Damocles hanging over everyone’s head”—he swung a pen back and forth to illustrate—“this is the debt limit.” The G.O.P., which had recently gained control of the House, was refusing to raise the limit, the legal ceiling on the amount the United States can borrow, unless there were substantial cuts to social programs. Markets had fallen on the possibility that the nation would default on its obligations, including paying the interest on Treasury bonds—thus potentially triggering a worldwide financial crisis. Biden had negotiated a compromise package with, among others, House Majority Leader Eric Cantor and Mitch McConnell, then the Senate Minority Leader, and in the end he helped sell the resulting deal to those House and Senate Democrats who saw it as a surrender.
Biden is again at the center of a debt-limit crisis; it’s a Washington drama that seems to play on a loop. McConnell is still around, too, though he has ceded the negotiations to Kevin McCarthy, the new Speaker of the House, who met with President Biden last Wednesday. McConnell told reporters, “We’re all behind Kevin, wishing him well.” For anybody who had watched the protracted, humiliating spectacle of the speakership election, that bit of cheerleading sounded empty. McCarthy yielded power to the most extreme members of his caucus; among other things, they gained a greater ability to block a deal.
In 2011, the talks were taking place well after the Treasury had effectively hit the ceiling, and was resorting to “extraordinary measures” to avoid a default. These actions included delaying investments in federal employees’ pension funds, but what they added up to was grand-scale scrounging. (In 1953, during an earlier debt-limit crisis, the federal government sold off gold coins and bullion that were sitting in its vaults—the change between the cushions of the national couch.) Similarly, Janet Yellen, the Secretary of the Treasury, informed Congress that the U.S. would be pressing up against the ceiling as of January 19th; it may be a few months before she has exhausted all the options. From the point of view of other advanced economies, such maneuvers are unstable and, fiscally speaking, pretty weird. (There is always talk of minting a trillion-dollar platinum coin to deposit in the government’s account at the Fed.) As with so much in American politics currently, the emergency has become deceptively familiar.
During the Trump Administration, there were three suspensions of the ceiling on the debt, which rose, during those years, from about nineteen trillion to twenty-seven trillion dollars (and is now more than thirty-one). Republicans, nonetheless, are again threatening to use the limit to break the economy if they don’t get what they want. But in 2011 they at least had a rough idea of what they were after. The current G.O.P. cast is more akin to a room of people shouting different and sometimes contradictory demands.
Some swear that they will protect defense spending, but maybe not for what Representative Jim Jordan calls the Pentagon’s “woke policies”; Senator Rand Paul, meanwhile, wants to take a hundred billion dollars from the military. Representative Anna Paulina Luna wants a balanced-budget amendment, no Social Security or Medicare cuts, and no tax increases. (“Where there’s a will, there’s a way,” she told NBC News.) Twenty-four G.O.P. senators signed a letter to Biden demanding unspecified “structural reforms”; among the senators were newly elected Trumpists, such as J. D. Vance and Ted Budd, who seem to see the debt-limit fight as an ideological testing ground. One could be forgiven for thinking that, for some, economic chaos is not a risk but the goal. Representative Greg Pence (the former Vice-President’s brother) told CNN that he wouldn’t vote to raise the limit even if he got everything he wanted. Representative Chip Roy thinks that the debt limit shouldn’t be raised until all asylum seekers can be kept in detention centers.
What’s remarkable, given that the Republicans are basically brainstorming a ransom letter, is how often they insert notes of fiscal sanctimony. “The debt ceiling is literally the nation’s credit card—it’s got a maximum,” Representative Steve Scalise said. It is literally not the nation’s credit card. When a card is maxed out, you can’t keep ordering goods and services, but Congress can, and does. The Treasury is not exceeding the debt limit because it has gone on a rogue shopping spree; it is trying to cover the spending that Congress has already approved. A better analogy would be someone who, faced with financial commitments—utilities, rent, child support—simply decides not to pay.
One distinctive, and alarming, aspect of the current crisis is the insistence in Republican circles that a version of this scenario might be just fine. The euphemism for this position is “payment prioritization.” The idea is that the Treasury can delay the global-financial-collapse moment by paying only the interest on its bonds and ignoring its other bills—such as salaries for soldiers, Social Security payments, and school lunches. There are technical problems with this scheme: the Treasury’s payment system is not reliably set up to stop some checks and not others, and it may not even have the legal power to do so. There are also obvious political and moral issues involved in deciding which payments are most important. But the idea itself is a fantasy. It’s not as though international markets would fail to notice that the U.S. was no longer standing by its non-bond financial obligations. Any lapse in payments, Yellen said, “is effectively a default.” And, at some point, the money still runs out.
A number of Republican lawmakers have referred to the limit as “leverage,” which amounts to an admission that they believe they are owed some kind of tribute in lieu of a default. High-stakes blackmail requires party discipline, however, and the G.O.P. leadership has not shown that it can exert such control when it needs to. The question about our perennial debt-ceiling crisis might remain tediously the same: Is the G.O.P. really reckless enough to go through with its threats? This time, though, there’s a different Republican Party, and there may be a different answer. ♦
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