News analysis: ‘Doubt ceiling’

Another report of the staredown-shakedown about government paying the bills already approved by Congress could lead to an impulse to ignore or condemn it as more Washington foolishness, corruption or incompetence by Republicans and Democrats alike. But it could have serious economic results to regular Americans – because a few dozen House members (many of whom are also election deniers!) care more about their failed agenda than the condition of the country. They didn’t achieve goals like huge budget cutbacks through the legislative process, so they’re resorting to blackmail.

Arizona Congressman Andy Biggs of Republicans’ Right-wing Freedom Caucus said, “It’s time we fight back against the bloated federal government and eliminate agencies that never should have been established in the first place.”

When the House on April 26 passed its 320-page “Limit, Save, Grow Act,” a debt-ceiling extension with strings attached by just 217-215, its conditions were so onerous that it seemed Republicans like Biggs weren’t merely threatening to force the nation into default. They were PLANNING on it.

Meanwhile, at press time, President Biden was meeting with Congressional leaders, Democrats and Republicans, to seek a way forward, but a compromise doesn’t seem inevitable.

In fact, political observers have suggested:

a short-term fix (still needing 60 Senators to prevent a filibuster) and a few Republican House members (the GOP has a 222-213 majority), delaying spending talks;

a parliamentary maneuver to petition a vote n a debt ceiling alone; and

offering to establish a “fiscal commission” to defer the spending debate.

Expectations are low.

However, the day before the debt-ceiling “summit,” a union filed suit and could present a breakthrough to end the economic hostage crisis.

The National Association of Government Employees labor union on May 8 sued President Joe Biden and Treasury Secretary Janet Yellen to try to stop them from complying with the law that limits the government’s total debt, which the lawsuit contends is unconstitutional

An SEIU affiliate, the NAGE says that if the White House and Yellen recognize the debt limit, and it’s not extended, they must decide which bills to pay and not pay, which violates the constitution’s separation of powers.  The President and Treasury Secretary have no authority to choose which payments to make because the Constitution grants spending power to Congress. Doing so, it contends, would violate the Constitution’s separation of powers.

“Nothing in the Constitution or any judicial decision interpreting the Constitution, allows Congress to leave unchecked discretion to the President to exercise the spending power vested in the legislative branch by canceling, suspending or refusing to carry out spending already approved by Congress.”

Others have noted that the Constitution’s 14^th Amendment says, in part, “The validity of the public debt of the United States, authorized by law, … shall not be questioned.”

 

THE SITUATION

The debt ceiling is a legal limit on how much money the federal government can borrow, so it can’t issue any more bonds, bills or notes. It’s not about future spending, which is addressed when Congress debates the budget.

The nation is about to reach its borrowing limit of $31.381 trillion,  but Republican leaders says they won’t raise the debt limit without extracting $131 billion in cuts to the U.S. budget, and Democrats want a debt-ceiling increase with no conditions, and are currently unwilling to entertain spending cuts.

Yellen said Treasury may be “unable to continue to satisfy all of the government’s obligations by earsly June.”

The restriction has existed since 1917, when Congress wanted to give government flexibility in borrowing instead of tightly holding financial reins. Just before the United States entered World War I, the country needed to raise a lot of money fast, so Congress stopped passing specific revenue measures and instead set a cap on how much money the government could borrow through various means.

Now, Republicans are trying to use their narrow edge in the House as leverage to make massive cuts in programs they oppose. Targeted cuts in their bill include Project Labor Agreements, education’s Pell Grants, Temporary Assistance for Needy Families, Head Start, Medicaid, SNAP food stamps and essentially all “discretionary” spending (outside military spending and Social Security).

Protests have erupted from interest groups across the political spectrum – more than 20 veterans groups, Catholic Charities and the labor movement.

AFL-CIO President Liz Shuler said, “House Speaker McCarthy's default debt-ceiling plan is an affront to working people. The AFL-CIO is strongly urging Congress to reject this plan to careen our nation into default, which would tank the economy and put millions of workers at risk.

“This misguided legislation will also harm our economy by slashing vital federal investments in clean energy and new technologies to expand domestic manufacturing and put millions of people to work,” she added.

 

POTENTIAL CONSEQUENCES

Warren Buffett on May 6 said a default would “disrupt the world’s financial system,” and Moody’s Analytics warns that a default could cause the stock market to drop by one-third, cost up to 6 million jobs, create a jobless rate of 9% and wipe out $15 trillion in household wealth.

If the country’s ‘full faith and credit” becomes suspect, people would see their bank accounts, mortgages and retirement savings jeopardized.

Rep. Jim McGovern (D-Mass.), the ranking Democrat on the House Committee on Rules, said, “This is a ransom note to the American people that makes devastating draconian cuts to programs that help the poor, the hungry, the sick and the vulnerable. Republicans tell us we need tax cuts for billionaires, but when it comes to programs for regular people, it’s cut, cut, cut.

“This is an extortion,” he continued. “You’re saying if we don’t agree to all these draconian cuts, they’re going to hurt people we fight for every day … That’s an all-time high in recklessness and stupidity.”

At best the GOP’s strategy is posturing, but it’s a big risk. At worst, their loss will be paid by the American people.

 

A sampling of other comments –

“What the Republicans are saying in their budget proposal is that, at a time of massive income and wealth inequality, when the richest people are becoming much richer, while working-class people are struggling, what they want to do is to cut programs for nutrition, for education, for healthcare. The Democrats and the president have got to be stronger on working-class issues. They have got to make it clear that we believe in a government that represents all, not just the few.”

- Sen. Bernie Sanders (I-Vt.)

 

“No one should assume that the Fed can really protect the economy and the financial system and our reputation globally from the damage that [a U.S. default] might inflict,” said today. “We shouldn’t even be talking about a world in which the U.S. doesn’t pay its bills. It just shouldn’t be a thing,”

- Republican Jerome Powell (Federal Reserve Chair)

 

“This bill would destroy Inflation Reduction Act investments that are already spurring job growth around our country building our clean energy future here at home. [It] also kills policies” like Project Labor Agreements and prevailing wages “to ensure the jobs created are good-paying, safe jobs with workers who are properly trained. And they get rid of vital credits that would grow clean energy jobs in rural communities and communities that have suffered job losses for decades due to offshoring of manufacturing jobs.”

- Jason Walsh (director of the BlueGreen Alliance, the union-environmentalist coalition)

 

“Such an event [demonstrates] the chaos within the United States, that we’re not capable of functioning as a democracy, and the governance issues associated with it. It would be…almost a certainty that Russia and China] would look to take advantage of the opportunity.”

- Avril Haines (Director of National Intelligence)

 

A default “could leave some lasting scars, including a permanent increase in the cost of funding U.S. federal debt.”

- David Kelly (chief global strategist at J.P. Morgan Asset Management)

 

“Republicans … want to destroy the government as it has existed since 1933, but since that government is actually quite popular, they cannot get the cuts they want by going through normal legislative procedures. Instead, they are trying to get their demands by holding the rest of us hostage.”

- Heather Cox Richardson (American historian, author and Boston College professor)

 

“Should we reward holding the threat of default as a hostage? No. It’s not real complicated.”

- Sen. Christopher Cross (D-Del.)