Democrats want Congress to raise the debt ceiling without conditions. Republicans in the House want numerous concessions. At present, it looks like both sides are on a collision course.
The Democrats on this issue are right. It should not require an act of Congress to allow the government to borrow the funds it needs to pay its obligations. As stated in Forbes:
Remember the U.S. is essentially the only country requiring a separate vote on raising the debt ceiling. Most governments assume if spending is legally authorized then the necessary funds must be made available, either through taxes or borrowing.
Yes, borrow it or raise taxes. Nobody, particularly Republicans are arguing to raise taxes.
See Link: The Trillion Dollar Coin
It does not need Congressional approval. Congress can work in a bipartisan manner, to cut spending. But not use the debt ceiling as some kind of bargaining chip. The consequences are too devastating in case of a standoff.
The second option which I like is for the Treasury to create a special-purpose entity to issue new securities (more like promissory notes) that can pay for expenditures. These entities have been used by the states, so in a way, they have been “road tested.”
I would have preferred Representative Elizabeth Warren’s recommendation to get rid of the debt ceiling. That makes perfect sense. Countries take incredible measures to avoid default on their debt, while we apparently intentionally crash our economy, while we have the ability to borrow the money.
See VOX Link: Our debt ceiling crisis could hit as early as June. Here’s how Biden can sidestep it.
The VOX article suggest in Option #3 that the president declares he must spend the money for the programs approved by Congress, and to do so, he is forced to borrow the money, since only Congress can raise taxes. So, in essence to obey one law, he must break another one. And of course, this is asking for a court battle and the 14th amendment will be pulled into the fight. . And absolutely calls for impeachment of Biden. Avoiding default by doing something about half of the US will consider illegal, is not a very good solution.
There is a second option, which I don’t see much chance in success. It is the discharge petition, which means Democrats have to find 5 moderate Republicans in the House to sign off on the no-strings attached ceiling limit increase, then get a discharge petition approved so they can bring it to the floor of the House.
Wall Street Journal: House Lawmakers Discuss Discharge Petition to Force Debt-Ceiling Vote
The last option would be to do everything the Republican want, which will assure Joe Biden or any other Democrat will have no chance of winning in 2024. Deep cuts in Medicare or Social Security will be blamed on Biden.
So, almost by default, the big coin option wins. The special purpose entity will buy time. The best option has to wait until Democrats control the House and the Senate, and the debt ceiling is eliminated for good.
One thought on “Debt Ceiling: Mint the Coin!”
Just after this post, Secretary of the Treasury, Janet Yellen, sent a letter to Congress, stating that she would start extraordinary measures to delay reaching the ceiling limit. Many news organizations provided accurate summaries of the current situation, including Bloombergcom as follows: https://www.bloomberg.com/news/articles/2023-01-13/what-s-the-debt-ceiling-and-will-the-us-raise-it?sref=MKhnhvyR