Preparing for Republican Debt Blackmail
By: Paul Krugman (nytimes)
S E E D E D C O N T E N T
Opinion Columnist
Nobody knows for sure what will happen in the midterm elections. But if Republicans take one or both houses of Congress, the most important question will be one that is getting hardly any public attention: What will the Biden administration do when the G.O.P. threatens to blow up the world economy by refusing to raise the debt limit?
In particular, will Democrats be prepared to take the extraordinary actions the situation will demand, doing whatever it takes to avoid being blackmailed?
Notice that I said "when," not "if." After Republicans took the House in 2010, they quickly weaponized the debt limit against the Obama administration, using it to extract spending cuts they couldn't have achieved through normal legislative means. And that was a pre-MAGA G.O.P., one that for the most part didn't deny the legitimacy of the president and didn't make excuses for violent insurrections.
In fact, I wonder whether Republicans will even seriously try to extract concessions this time around, as opposed to creating chaos for its own sake.
Notice also that I said "blow up the world economy," not merely hamstring the U.S. government. For the consequences of forcing a federal debt default, which is what refusing to raise the limit would do, would extend far beyond the operations of the federal government itself.
Let's back up and talk about why any of this is an issue. U.S. law, for historical reasons, requires in effect that Congress vote on the budget twice. First, senators and representatives enact legislation that sets tax rates and authorizes spending. This legislation ends up determining the federal budget balance. But if we end up running a deficit, Congress must vote a second time, to authorize borrowing to cover that deficit.
It's not clear that this procedure ever made sense. In any case, in modern times the debt limit empowers cowardly posturing: Politicians can claim to be for fiscal responsibility, refusing to vote for a higher debt limit, without specifying how the budget should be balanced.
And no, "we should eliminate wasteful spending" isn't an honest answer. The federal government is basically a giant insurance company with an army: Spending is dominated by Social Security, Medicare, Medicaid and the military, and voters wanttomaintainall of these programs. There's surely waste in the government, as there is in any large organization, but even if we could somehow make that waste disappear, it wouldn't do much to reduce the deficit.
Someone seriously worried about the deficit could call for higher taxes. After all, the U.S. tax burden is low compared with other wealthy countries. But Republicans aren't going to go there.
Where will they go? There's lots of evidence that Republicans will, if they can, try to use the debt limit to extort major cuts in Social Security and Medicare. They probably couldn't pass such cuts — which would be deeply unpopular — through the normal legislative process, and they certainly wouldn't have enough votes to override a Biden veto. But the idea would be to force Democrats into complicity, so that the public doesn't realize who's responsible for the pain.
And that's a best-case scenario. As I said, the G.O.P. is far more radical now than it was more than a decade ago, and it might well be less interested in achieving policy goals than in blowing up the world economy on a Democratic president's watch.
Why would refusing to raise the debt limit blow up the economy? In the modern world, U.S. debt plays a crucial role: It is the ultimate safe asset, easily converted into cash, and there are no good alternatives. If investors lose confidence that the U.S. government will honor its obligations, the resulting financial storm will make the recent chaos in Britain look like a passing shower.
So what should be done to avert this threat? If Republicans do gain control of one or both houses in November, Democrats should use the lame-duck session to enact a very large rise in the debt limit, enough to put the issue on ice for years. Republicans and pundits who don't understand the stakes would furiously attack this move, but it would be far better than enabling extortion — and would probably be forgotten by the time of the 2024 election.
If for some reason Democrats don't take this obvious step, the Biden administration should be prepared to turn to legal strategies for bypassing the debt limit. There appear to be several loopholes the administration could exploit — minting trillion-dollar platinum coins is the most famous, but there are others, like issuing bonds with no maturity date and hence no face value.
The Obama administration was unwilling to go any of these routes, largely, I think, because it believed that they would look gimmicky and undignified, and it preferred to seek compromise. But surely Democrats don't need to worry about dignity when the other party is ruled by Donald Trump. And in any case, they're now confronting opponents who aren't just radical but also anti-democracy; no real compromise is possible.
Of course, none of this will be relevant if Democrats hold Congress. But they should prepare for the worst.
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I would rather see this solved through congressional negotiation , but given the extremism of Republicans that may not be possible. Krugman makes good points.
Given what the debt limit actually is, it should be automated and removed from being an option for Congress to vote on.
Hell yeah Ozzy, why have a debt limit at all....it's such a joke
Okay the debt limit he is talking about is the debt ceiling where the government has to pay the bill on the debt they have already voted on spending.
In simplest possible terms:
It is like taking the time to fill out an application, get a credit card, use the credit card, then decide not to make the payments for that credit card.
That's a mind-numbingly terrible idea.
Check and balances exist for a reason.
Exactly, the current ceiling of $31.4 trillion is outrageously low. Of course where you stand depends on where you sit:
SEN Obama was worried about an $8.6T debt and $220B in annual interest payment, today it's $30.9T and $580B.
Says someone who apparently has no idea what the debt ceiling actually is.
*eyeroll*
Since the larger concept is clearly causing you a bit of difficulty, let's use your credit card analogy from 1.1.2.
Yes, we've already run up the credit card. Yes, we'll need to pay it. But at some point, we definitely need to have some conversations about how we intend to stop spending so much money and giving so much money away, in the same way we would not want the limit on the credit card to increase automatically whenever we maxed it out.
Without congressional review, there is no check or balance on future fiscal irresponsibility. This is especially significant in light of Biden's repeated use of presidential decrees in fiscally and otherwise generally irresponsible manners, as well as rampaging spending by the Democrat controlled Congress.
Congressional review provides at least some minor level of accountability.
Actually it's more like having a credit card, maxing it out and then wanting the limit raised so that you can continue to use it. All while only paying the interest monthly.
Wrong. Back to 5th grade for you.
Such a juvenile response, maybe you should go back.
As the US already has that credit card and is paying the interest on it (as we almost never seem to pay down the debt, the last president to actually reduce the debt was Clinton), and Washington wants to raise the debt limit due to expenditures that were approved previously but the income is not sufficient to meet what was approved so they need to borrow more.
How is this not like a person having a credit card, maxing it out (reaching it's limit) and then wanting the limit raised so that the card can continue to be used, all while only paying the interest. Please explain your oh so education position on this.
But accurate and appropriate.
One can’t help but notice that you failed in answering the question.
so you won't explain. That can only mean you have nothing as usual. So the only response I can give is fuck off
I'm not sure when I last saw such a pile of horseshit.
It's amazing how they fit so much wrong into that number of words.
If Biden didn't illegally give away 600 billion odd dollars, there'd be less of a problem.
hmmmm, kind of an interesting idea. Wonder what the long-term impact could be for the Democrats if they do this in December?
I'll admit, I find it kind of frustrating that this issue haunts us still. Congress controls the purse strings and determines the budget and if they cannot make a balanced budget they then have to vote on how much more to raise the debt limit. Seems to me the two issues should really go hand in hand. This separation, to me, looks like they set the budget and hope the income matches what they are spending.
Yes, Let's listen to Paul Krugman, he makes between 300 and 500 thousand a year from teaching and lying for the Times, and only has a net worth of only 5 million? looking at the guy, most of his income must go to hookers. Maybe we should take advice from someone who is actually successful?