The editors of the Washington Post support a plan for avoiding a default and reducing the deficit:
Two things are simultaneously true: Congress needs to raise the debt limit as soon as June 1 to avoid the first default in U.S. history, and lawmakers need to address the nation’s unsustainable budget situation.
It’s welcome news that President Biden is finally sitting down with House Speaker Kevin McCarthy (R-Calif.) and other congressional leaders at the White House on Tuesday. But unless a miracle occurs, there likely isn’t enough time to agree on meaningful budget changes by early June. Mr. Biden wants a “clean†debt limit bill that solely raises the borrowing cap. Meanwhile, House Republicans want nearly $5 trillion worth of cuts. That’s a Grand Canyon-size gap. It’s encouraging that House Democrats have been quietly preparing to use an emergency parliamentary maneuver known as “a discharge petition†that would allow them to get a debt hike bill on the floor, but it’s a long shot. All Democrats and at least five Republicans would need to vote for it. That won’t happen without some sort of compromise budget deal in the works.
The plan they recommend consists of a short term debt limit increase, followed by “clawing back unspent emergency covid funds”, “revenue enhancers”, and “spending moderation”. The challenge for that is that President Bide poisoned the well when he backed off from the commitments he made to Joe Manchin to get his misnamed Inflation Reduction Act passed.
Democrats seem to have forgotten that during the last administration the president actually negotiated spending increases with the Congress to get the debt limit raised. I don’t actually blame them. Spending increases are more politically advantageous to them than spending reductions.
To my eye both parties are living in fantasy worlds. The Democrats demand real spending increases, imagining that will result in economic growth while the Republicans demand real tax reductions, similarly imagining economic growth. What are needed are much more targeted spending or tax reduction that results in real increases in production. We need to produce more of what we consume and, by the way, paying more for the same services is not an increase in production.
Targeting that precisely and correctly is difficult—it doesn’t play to the Congress’s strengths.
Good news, we’ve already avoided “the first default in U.S. history,” which happened in 1934.
https://en.wikipedia.org/wiki/Liberty_bond#Default_of_the_Fourth_Liberty_Bond
Truly there is nothing new under the sun. Especially partisan posturing.
The rhetoric on raising the debt ceiling changes and differs depending on which party is addressing it. According to Dems and Yellen it will be “catastrophic†if the debt ceiling is not immediately raised To “pay its bills.†However, the House majority and conservatives say current revenues will be enough to pay interest on the debt and meet social security and Medicare obligations . What may have to wait are payments to NIH etc. – less immediate in the hierarchy of funding demands.
The only plan in play, to address the budget and debt, is the one submitted by the House majority. It both cuts debt (not that significantly) and raises a restrained debt ceiling. Supposedly the Senate Republicans are backing McCarthy’s lead on this, creating an interesting hold-the-line attitude. It seems to me it’s time to finally address and put first our unsustainable debt circumstances, rather than the Dems frivolous print-and-spend formula for running the government. It’s also time to refrain from superlatives in describing what will happen should payments be prioritized in navigating through a less well funded budget. Instead, such anxious statements should be relocated to the flood of illegals being unleashed on this country by the insanity of Biden’s open border policies.
This is a bit of outlandish legal take, I am waiting until this is the White Houses position as negotiations get down to the wire…
Section 4 of the 14th amendment says public debt shall not be questioned, except when Congress expressly exercises one of its plenary powers (for example to regulate money); that in turn has an exception where the President can nullify any debt ceiling prescribed by Congress to enforce Section 4 of the 14th amendment.
It is kind of funny the Supreme Court said in Perry vs United States, “Congress is wrong to break all these obligations; but there is no fair remedy so tough luck”. Reminds me of the argument I was making in previous posts.
PD Shaw:
I think it bears mentioning that the Fourth Liberty Bond was created as a consequence of the creation of the debt ceiling back in 1917. Or, said another way, in a sense “debt ceiling” and “default” are synonymous.
At this point, cutting spending and raising taxes will not help. “Inflating the debt away” is a fantasy. You need a multiple not a small percentage.
So, the only options are to increase production. Re-shoring manufacturing would be my prefered method of increasing, but financialization is the easiest way. Also, financialization can be exported, and the rest of the world can pay for US borrowing.
(Financialization is not consumer debt.)
Another method would be a war that would destroy production capacity. Ukraine and Russia ain’t gonna cut it, but China and Taiwan would. As long as the US was not “officially” involved, we could supply Taiwan with all the weapons needed. This would be a twofer.
Another possibility would be to encourage reunification of the Koreas. This would redirect S. Korean production capacity to N. Korea.
We should encourage Germany to become the greenest country. In addition to windmills, they should bring back the waterwheel.
They’ll probably also need mills based on human or animal power.
@CuriousOnlooker, there was no majority opinion in Perry, so people looking to it for guidance today may be sorely surprised when the Courts analyze things entirely differently. Generally 4-1-4 decisions don’t survive the test of time.
(I understand the concurring Justice to have wanted to avoid any Constitutional pronouncements, but treat the gold clauses in the U.S. bonds the same as the SCOTUS had treated gold clauses in private bonds. In either case, there was no longer a domestic free market for gold.)
You seem to have forgotten that in 2019 Trump also wanted spending increases. AFAICT in the past there have been some negotiations over spending for some specific items like Hurricane relief but large across the board spending cuts or increases have not generally been demanded and poison pills have been avoided staying away from non-budgetary issues.
Query- I looked but couldn’t find any prior example of the debt limit being used to try to reverse a recently passed bill. Did I miss something?
Steve