The US debt has been a contentious issue for years, with Republicans and Democrats arguing about who should pay more. Now that the economy is booming, it’s time to consider the possibility of raising the debt ceiling.
The debt ceiling is the maximum amount of money that the United States government is allowed to borrow. It is a limit on how much money can be spent by the federal government, and it must be raised periodically.
On September 30, the Senate and the Capitol dome in Washington, D.C.
Associated Press photo by Patrick Semansky
Mitch McConnell wrote President Biden a letter on Monday in which he reiterated, as he has for months, that Democrats are solely responsible for increasing the nation’s debt ceiling. Mr. McConnell’s stance, according to the president, is “reckless” and “irresponsible.”
Despite the fact that Mr. McConnell’s methods are clearly political, Vice President Biden and Senate Minority Leader Chuck Schumer must confront the reality that they do not have the ability to force him to alter his mind. The nation risks an economic catastrophe if Democrats do not fulfill the duty that Mr. McConnell has entrusted to them.
Treasury Secretary Janet Yellen has said that the Treasury would be unable to fulfill the government’s commitments by October 18. The Bipartisan Policy Center came to the same result in a thorough analysis: the government will run out of money between Oct. 15 and Nov. 3. In the most catastrophic scenario, the Treasury would be obliged to leave up to 40% of its commitments unmet in the coming weeks, resulting in a $265 billion deficit.
It would be disastrous for the nation and the globe if the debt limit were to be breached. Markets would be thrown into chaos as Treasury tried to sort through claims. Holders of maturing US securities may be informed that they must wait for full payment; shortages in Social Security, Medicare, and military wages may arise. Standard & Poor’s lowered its credit rating of US debt for the first time in 2011 after a similar standoff over the debt limit.
In an alternative political world, the Biden administration would propose and Congress would pass regular debt-ceiling legislation. Mr. McConnell, on the other hand, has blocked this escape route with a filibuster that could only be overcome if every Senate Democrat agreed to change the rules to exclude votes on the debt limit. Without this modification, Majority Leader Chuck Schumer’s declaration on Monday that the Senate would vote again on a bill it earlier rejected seems unlikely to result in a different outcome.
Senator McConnell claims that Republicans are under no duty to support Vice President Biden’s broad agenda. Instead, he believes the Democrats should increase the debt limit via budget reconciliation on their own. The Democratic opposition to this path is mostly political. They’d have to change the budget resolution they approved over two months ago. Republicans would have another opportunity to compel Democrats to vote on politically unpopular amendments, wasting valuable floor time.
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Even worse for the Democrats, although regular legislation would enable them to temporarily “suspend” the debt ceiling, the rules of budget reconciliation compel them to set a new debt ceiling. The Republican attack advertisements speak for themselves: Democrats have pushed the nation further into debt to fund their socialist agenda.
As a result of this possibility, the government is considering novel but untested alternatives. The 14th Amendment says that “the legality of the public debt of the United States, sanctioned by law, shall not be questioned.” Some academics think this phrase would allow—or perhaps require—the president to take action to avoid a financial default, but others disagree. President Obama examined this option in 2013, but decided against it because he believed it would quickly get mired in litigation, exacerbating the uncertainty it was supposed to alleviate.
The president may overcome the conflict between three incompatible legal requirements—approved spending, allowed taxing, and authorized borrowing—by exceeding the debt ceiling, according to a version of this approach dubbed the “least unconstitutional” option by its academic writers. However, this alternative has the same problem as Mr. Obama’s decision not to use the 14th Amendment.
Another alternative, which is more obviously legal but sounds ridiculous, is for Treasury to produce a platinum coin with a face value of, say, $2 trillion and deposit it in Treasury’s Federal Reserve account. The legislation allowing the minting of such a coin would very certainly compel the Fed to accept the deposit, and Treasury could use the money to pay the government’s obligations until the debt limit is raised by Congress. The risk is that international markets may decide that American economic policy has become fundamentally irresponsible and respond accordingly.
The only reasonable choice for the administration is to revisit the budget resolution that kicks off the reconciliation process. Because this procedure will take at least two weeks, the administration should begin immediately.
Meanwhile, a senior adviser to Senate Budget Committee Chairman Bernie Sanders told the Washington Post, “We’re not doing the debt limit via reconciliation.” Period. “This is the end of the discussion.” A crisis may be inevitable if this is the senator’s ultimate stance.
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The how many votes are needed to raise the debt ceiling is a question that has been asked before. It is not clear how many votes it will take to raise the debt ceiling.
- reconciliation bill
- debt limit
- what happens if debt ceiling isn’t raised
- debt ceiling history
- how long does budget reconciliation take