The Next Debt Ceiling Showdown

The Next Debt Ceiling Showdown

Even after two Obama-era clashes over spending limits, Democrats are still looking for a “grand bargain.”


The negotiations around the pending approach of the debt ceiling limit are shrouded in media-driven intrigue, but they boast as much creative and original thinking as the latest installment in the Fast and Furious franchise. And like each new entry in that steal-chase-crash-and-repeat Hollywood empire, the debt ceiling drama is long on senseless mayhem and short on coherent plotting.

This time out, though, we had some initial cause to anticipate a different narrative. President Joe Biden had signaled early on in discussions of federal spending that he would only agree to a clean increase in the debt limit, without proposed spending cuts from the GOP caucus in the House. With the unhinged anti-government Freedom Caucus dictating much of Speaker Kevin McCarthy’s agenda and strategic thinking, that was clearly the proper course of action. But as McCarthy dragged an accord on spending through the House, Biden and his advisers started to indicate they’d be open to some spending trade-offs—an unwelcome reprise of the disastrous Obama-era quest for a mythic “grand bargain” on spending to fend off a 2011 debt ceiling fight. When that approach produced virtually nothing beyond more concessions to the Tea Party right, Obama strategists stared down the threatened return of extortionate debt ceiling antics from Congress in 2013; the right duly caved, and the business of government went on without the threat of a calamitous US default.

It’s hard to suss out just why the clear morals of the last two debt ceiling showdowns haven’t played a bigger role in this one. It’s not as though McCarthy is in a stronger negotiating position than John Boehner had been in back then—he has a razor-thin four-vote majority, and the Freedom Caucus threatens either to undermine or terminate his speakership with numbing regularity. What’s more, Biden himself was Obama’s vice president back then; he negotiated the deal with Senate majority leader Mitch McConnell in 2011, and should be all too cognizant now of the futility of trying to placate fiscal terrorists.

Yet here we are, on the verge of a series of unforced strategic errors from a Democratic White House, strengthening the hand of a GOP caucus that is determined neither to honor Congress’s existing spending commitments nor to abide by any intelligible budget priorities beyond feeding America’s permanent warfare state. Of course, because of the sequestered character of D.C.’s debt talks, there may be a strategy in play that mere civilians aren’t privy to. It’s entirely possible that Biden is letting the clock run down on the approach of the debt limit—roughly pegged by Treasury Secretary Janet Yellen at June 1—in order to induce McCarthy to climb down from the House’s inventory of demands for spending cuts. In this scenario, the GOP’s caving would come either in response to the threat of a pending default (as it did in 2013) or an invocation of the public debt clause of the 14th Amendment.

“You have to have a debate over spending,” says Dean Baker, senior economist with the Center for Economic Policy and Research. “Everyone understands that, and Biden’s totally prepared to deal with that. But the idea that you take the economy hostage to force a debate, that really isn’t acceptable.… Who knows what’s being said in secret, but you do start to get close to the 14th Amendment. Then, if McCarthy is facing that, he has a really strong incentive to fold. He’s better off going back to his caucus saying he got them something.”

That prospective outcome could also be what’s prompting the White House to draw out the debt talks. “If you work from the standpoint that they see the 14th Amendment as an option, it makes sense for them to sit down and negotiate in good faith, so they can say they’ve exhausted all options,” Baker says. “I don’t know if it’s a week, two weeks, or four days—some close period in which Biden says, ‘I don’t have another option.’ Particularly with this, he understands that this is an extreme measure, so you don’t want to be saying in effect, ‘I just don’t think this law is constitutional; I have to break it.’”

Yet in some ways, that’s the only way to bring this whole study in rudderless legislative posturing to a definitive resolution—and just as important, to ensure that the GOP majority doesn’t try the same ploy when it next decides it’s politically expedient. But deeming the debt ceiling unconstitutional under the public debt clause of the 14th Amendment—which plainly declares that “the validity of the public debt of the United States…shall not be questioned”—isn’t a simple act of lawyerly incantation. “Saying the limit is unconstitutional isn’t the way to go,” says Joseph Fishkin, a professor of constitutional law at the UCLA School of Law. “It sets up a direct court fight. If you do something that on its face keeps to the letter of the law exactly, you’re in a much better position for the court fight you’re going to have anyway.”

This is where measures like the famed trillion-dollar coin come in—instruments that permit the Treasury Department to rapidly scale up its capacity to float new debt without facing the specter of right-wing hijacking in Congress. Fishkin has argued that the coin is too vulnerable to charges of frivolity, and so has proposed that Treasury issue a series of premium bonds to streamline debt creation in advance of a 14th Amendment showdown in the courts. He also notes that, in a coin-like escalation of the bond process, Treasury can float what are called “consols”—bonds that bear no face value or fixed redemption date.

“You’re basically saying the value of a bond has more than one part,” Fishkin says. “Partly that’s the face value, which you get at the end, or in consols never—particularly if the value is in interest payments. Each of these strategies is a way of pulling those two things apart, so that you have more of the value be in interest payments than in face value. There are various ways to get there, but the key thing is to have low face value bonds where the Treasury can raise a lot more value than the face value.…. Hopefully people inside the Treasury Department are having the same conversation. The only reason I’m treating this as part of my job is because we have got to bring the political discourse and punditocracy on board. Otherwise, it’s going to seem totally crazy if the government pulls one of these things off.”

The public discourse is indeed a major factor in permitting the bad-faith rigging of the debt debate to fester on. Few press accounts of the pending battle between Congress and the White House refer back to the 2011 and ’13 battles—let alone treat the many viable efforts to engage the constitutional side of the struggle as anything other than ad hoc novelties. Instead, what’s par for the course among our establishment gatekeepers of respectable discourse are things like former George W. Bush–appointed appellate judge Michael McConnell’s recent New York Times op-ed deriding the constitutional case against the debt ceiling as “dangerous nonsense” (even though that phrasing is a far more apt depiction of McConnell’s own argument).

“The thing that’s most frustrating of all is this baseline assumption of a lot of the coverage, reinforced by McConnell’s op-ed, that the debt ceiling is the law you have to observe over, say, honoring Social Security payments,” Fishkin says. “The conventional wisdom in D.C. is so wired for the idea that bipartisan deals are great. No, actually, unilateral executive action to take the hostage away from the hostage takers is great.” Alas, that’s not the sort of life wisdom you’re likely to glean from any Fast and Furious dialogue.

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