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Ten years after Congressional Republicans caused an unprecedented downgrade of America’s credit rating by holding the US public debt hostage in their bid to weaken a first-term Democratic president, it’s déjà vu all over again.
In a Tuesday letter to House Speaker Nancy Pelosi, Treasury Secretary Janet Yellen warned that it will be “uncertain” whether the US Treasury could “continue to meet all the nation’s commitments” after 18 October, when it will run up against the limitations of a 1917 law which restricts the government’s ability to issue new bonds.
Giving the Treasury license to issue the financial instruments needed to pay Congress’ bills normally requires legislation to pass without a Senate filibuster. But so far, Senate Republican Leader Mitch McConnell has refused to allow any bill that would avert the economic carnage of a default to pass the upper chamber.
“Mitch is doing what Mitch does,” said former GOP representative Joe Walsh, who described the tactic as “political hardball” meant only to “make the Democrats hurt”.
“Neither party cares about the debt,” he added.
Before passage of the Second Liberty Bond Act, Congress approved the issuance of new bonds on a case-by-case basis. But the exigencies of America’s involvement in the First World War forced Congress to enact a more flexible arrangement, which gave the Treasury the ability to issue debt up to a statutory limit.
And for many years after that, the limit became a non-issue. When it needed to be raised, Congress raised it rather than risk the catastrophic economic consequences that would arise if America failed to pay its bills. The practice became so routine that in 1979 the House of Representatives adopted a parliamentary rule that automatically raised the limit each time Congress passed a budget.
But when the GOP retook the House under then-Speaker Newt Gingrich, the then-ascendant House Republican Conference made a show of scrapping that rule as a putative demonstration of their fiscal responsibility. In explanation, they falsely claimed that raising the debt limit was the same as authorizing new spending when in reality, the Treasury issues new debt to pay bills Congress has already incurred with prior spending bills.
It was no coincidence that the GOP’s sudden aversion to issuing new debt to pay bills arose during Bill Clinton’s presidency. Republicans, led by Gingrich, threatened to refuse to increase the debt ceiling if Clinton didn’t scale back his plans for new spending on education, environmental programs and Medicare. The dispute caused what was, until 2019, the longest ever partial shutdown of the US government.
Since then, the GOP has learned that weaponizing America’s credit limit is a handy way to hamstring Democratic presidents. After Tea Party-infused Republicans took the House during Barack Obama’s first term, they brought the economy to the brink of crisis in 2011 and 2013 by playing chicken over whether the US would default on its debts. Those concerns disappeared when Donald Trump controlled the executive branch, but with Biden now in the White House, the GOP is once again making use of a favored tactic for hurting the president’s congressional allies.
“[McConnell] knows the Democrats are in a real bind this week,” said Walsh. “He’s not gonna help at all, so he’ll play Russian roulette with the debt ceiling.” Walsh later added that McConnell and his own former GOP colleagues probably want the US to default on its debt so they can blame Biden for the resulting economic crash.
Bruce Bartlett — a former Reagan administration treasury official who in 2002 told the Senate Finance Committee that the debt limit should be deemed unconstitutional under a clause of the 14th Amendment, which says US public debt “shall not be questioned” — said in a phone interview that the number of Republicans who see a default as a win because it would hurt the Biden administration is relatively small.
“There are some, but I don’t think there are very many of them — and they’re all f**king morons who know absolutely nothing about finance, or how the Treasury operates or anything else,” he explained. He later suggested that McConnell’s aim in trying to force Democrats to raise it on a party-line basis might be more narrowly targeted. McConnell, Bartlett suggested, is trying to force Senate Democrats to use so-called “reconciliation” rules — which allow budget-related legislation to pass with only 51 votes — because such provisions can only be passed a limited number of times each fiscal year.
The former Treasury official blamed Senate Democratic Leader Chuck Schumer’s incompetence for giving the Kentucky Republican an opening to put a damper on Democrats’ plans. “I think Schumer has been utterly inept in the way he’s handled all this,” he said. “McConnell is simply taking advantage of an opportunity that the Democrats gave to him. They could have handled this in a more timely manner and gotten this all taken care of, but they d**ked around and got themselves into this situation.” He also predicted that McConnell would relent and allow a limited increase for a few weeks so a broader compromise could be crafted — and that the Republican leader would be hailed as a hero for it.
Bartlett added that McConnell is also trying to get Democrats to increase the debt ceiling by a specific amount rather than suspended it as was done under previous Republican presidents. “He wants them to be forced to raise the debt limit as it was traditionally done to a new dollar level. That way, it makes it easier for him to say the Democrats increased the debt by X trillion dollars,” he said. “Now, I think that’s chicken-s**t high school crap, but that’s part of what’s going on here.”
Former Maryland Lieutenant Governor and Republican National Committee Chair Michael Steele also had harsh words for Schumer and Senate Democrats for not anticipating how McConnell would weaponize the nation’s credit, though he called McConnell’s tactics “political bullying of the first order”.
“McConnell has effectively and consistently neutered the Democrat majority on everything from SCOTUS nominations to now raising the debt ceiling,” Steele said. “Democrats continue to act like Republicans are playing by the same set of rules.”
He later added that Schumer and Congressional Democrats were “suckers” for doing so, and said they are playing right into the GOP’s hands by not being able to get out of their own way. “With opponents like the Democrats, McConnell’s strategy is so obvious: Weaken confidence in the economy, exploit continued mixed messaging on Covid, do not get in the way of certain efforts by states on voting rights — rinse, repeat. Win 2022,” he explained. “Republicans are playing to take the House and Senate. Democrats don’t know how to keep either.”