Key House Republicans want to slash Medicare and Social Security so badly that they’re willing to risk a global financial crisis over it.
Their weapon? The debt ceiling, an arbitrary, purely political limit on federal borrowing that bears no meaningful relationship to the health of the economy. It’s a farcical problem—and demands an equally farcical solution.
The debt ceiling doesn’t limit what the government can spend. It limits how much the Treasury can borrow to pay for spending Congress has already required. Refusing to raise the debt ceiling amounts to prohibiting the government from paying a debt Congress already incurred.
Also read: Yellen says debt-limit standoff risks ‘self-imposed calamity’
If that happens, that would shred the full faith and credit of the United States, send our national credit rating down the tubes, and plunge both the U.S. and global economy into crisis. It could destroy 6 million jobs and wipe out $15 trillion in household wealth in this country alone.
It’s not about deficits
Republicans say this is about reducing the deficit, but their actions say otherwise.
The ballooning of the deficit since 2001 has been caused in large part by unfunded wars, exorbitant tax cuts to the very wealthy and corporations, and out-of-control Pentagon spending. More of the same helped Trump add nearly $8 trillion to the national debt in just four years, an increase that started well before the pandemic.
Yet under Trump, Republicans simply suspended the debt ceiling.
And now, in the same breath that they complain about deficits, they call for more tax cuts for the wealthy—and many want more Pentagon spending, too. Fiscally responsible they are not. They’re practicing pure political chicanery, using the debt ceiling to hold the well-being of average Americans ransom to these ideological demands.
That’s exactly what they did after taking control of Congress in 2011. Back then Democrats acquiesced, resulting in the passage of the so-called Budget Control Act—a devastating economic austerity program that set our recovery from the Great Recession back by five to six years, according to the Economic Policy Institute.
If the right gets its way today, all mandatory spending—including Social Security and Medicare, veterans’ programs, housing and nutrition assistance for struggling families, support for farmers and small businesses and students, and Affordable Care Act subsidies that help insure tens of millions of Americans—could be fodder for the chopping block.
What can be done?
That can’t happen. But neither can a debt default. So what can be done?
The only responsible policy is to abolish the debt ceiling. But with hard-line Republicans dead-set on political theater and threatening an economic calamity, that’s unlikely to get through Congress.
Well, this farcical problem demands a farcical solution: the Biden administration should simply mint a really, really big coin. That way, it could spend the money Congress has legally required it to spend—without borrowing the money Congress won’t let it borrow.
The Biden administration has resisted the “Really Big Coin” idea, but It’s perfectly legal. In fact, it would help the administration meet its Constitutional obligation under the 14th Amendment, which states that the faith and credit of the United States can never be in question.
Some observers have called on Biden to make it a trillion-dollar coin. I say mint a bazillion-dollar coin—and put this far-right absurdity to the rest with a touch of productive absurdity.
Then we can push for a budget that raises revenue from fair taxes and makes necessary the social investments that help all of us. You know, governing.
Karen Dolan is a poverty expert and fellow at the Institute for Policy Studies.
More on the debt ceiling
James K. Galbraith: The debt ceiling is a farce, not a crisis
Alan Sloan: The Obscure Law Biden Should Invoke to Get Around the Debt Limit
Why the U.S. debt-ceiling is already worrying stock and bond investors