by Robert Reich
I want to start today with a bit of history that sheds some light on what’s happening in Washington this week, and what Biden should do about the debt-ceiling crisis created by Kevin McCarthy’s Republican House.
On Oct. 22, 1985, Treasury Secretary James A. Baker III told congressional leaders that if Congress failed to raise the debt ceiling by the end of the month, the Reagan administration would pay the nation’s bills by taking back Treasury securities in which Social Security had invested.
I remember being stunned at the time. It was an extraordinary move. It meant Social Security would lose interest paid on its funds.
If Congress still didn’t raise the debt ceiling, Baker said the administration would borrow from the railroad retirement and military retirement trust funds. And if the impasse continued, the administration would begin selling gold from the U.S. gold reserve even though “that could undercut confidence here and abroad based on the widespread belief that the gold reserve is the foundation of our financial system,” Baker said.
Baker’s point was that the Reagan administration would continue to find ways to pay the nation’s bills, come hell or high water.
An agreement was finally reached after the Reagan administration had begun raiding Social Security but before it took any other measures.
The Comptroller General of the United States later found Baker’s raid on Social Security technically illegal but concluded nonetheless that Baker “did not act unreasonably” under the circumstances.
I recount this history to give you some perspective on the current debt-ceiling crisis, and what I believe should be Biden’s next move.
First, showdowns over the debt ceiling have been going on for a long time.
Second, they have often been fueled by soaring national debts due to Republican tax cuts for the wealthy and big corporations. (The 1985 standoff involved a refusal by senate Democrats to support a balanced budget, even though Reagan’s mammoth spending on the military and huge tax cut had doubled the national debt in less than five years.)
Finally, fights over the debt ceiling have required Treasury secretaries to do extraordinary things to keep paying the nation’s bills — sometimes technically illegal.
Hence, there have never been “X-dates” at which time the Treasury runs dry. There are just ever more extreme government bookkeeping measures.
And there is no end to the measures the Treasury might use to keep paying the bills. Although their legality of some might be dubious, who is to complain? Who is to say a Treasury secretary acted unreasonably in paying a lawful claim on the U.S. government?
This standoff is different in one respect. Previous standoffs have been carefully-crafted dramas in which both sides demonstrate their commitments to their position, knowing full well how the play will end — with the debt ceiling lifted.
This time, though, gonzo lawmakers like Marjorie Taylor Greene and raving nut jobs like the current Republican frontrunner for president have considerable influence.
And unlike Bob Dole in 1985, these players have no real commitment to cutting the government debt. (Were that their goal, presumably they wouldn’t have supported the massive 2017 tax cuts for the wealthy and big corporations that fueled the debt or would now urge its repeal. And they certainly wouldn’t demand cuts in staffing for the IRS, which House Republicans are also now doing.)
Their only commitment is to power — gaining dominance over, and submission from, Democrats, progressives, putative “coastal elites” and so-called “deep state” bureaucrats.
For them, this is not play-acting. It’s not for show. It’s for real. If they don’t get their way, they’re prepared to blow up the economy.
In fact, as the so-called X-date appears to loom ever closer, their demands have escalated. And as Biden appears ready to give in to some of those demands, the demands will continue to escalate.
Which is why it’s critical for Biden to stop negotiating.
Meanwhile, he should continue paying the government’s bills and Treasury Secretary Janet Yellen should continue using every bookkeeping scheme imaginable to find the means to pay those bills.
And they must never declare an “X-date.” And must never default.
If Kevin McCarthy and his band of radicals don’t like this, let them take the Biden administration to court.
Let McCarthy, Marjorie Taylor Greene and the other loonies demand openly and publicly in court that Biden not honor the full faith and credit of the United States — with the predictable results that the cost of borrowing skyrockets, bond markets crash, the stock market plummets, the global economy is in turmoil, the dollar’s status as the world’s major currency is up for grabs, America is plunged into a deep recession and millions of jobs are lost.
In other words, let McCarthy and House Republicans seek to enforce their dangerous nonsense about the debt ceiling — so that Americans can see clearly what they’re up to.
What do you think?
