The United States is less than a month away from driving headfirst over the proverbial fiscal cliff. Unless the Republican-controlled House of Representatives passes a bill to increase the debt limit that is also acceptable to the Democrat-controlled Senate and the White House, the United States will, for the first time in its history, default on its debt. That would provoke a catastrophe, likely plunging the U.S. into recession.
So the question on everyone’s mind is: Can this calamity be avoided? No … and yes.
Republicans and Democrats will almost certainly fail to craft a legislative compromise. Neither side wants to find agreement and even if one did, there is likely no deal that both sides could agree to. Instead, President Joe Biden must act unilaterally — perhaps by minting a $1 trillion platinum coin (unlikely) or choosing to simply ignore the debt limit and continue to borrow money (more likely). Whatever tactic he chooses, the burden will be on Biden to act — and ironically, all sides in Washington would benefit if he does.
Even if Biden did agree to haggle with Republicans, it’s hard to imagine that any kind of deal could be reached.
The crux of the debt limit dilemma is that House Republicans and the White House (with the support of congressional Democrats) have settled into two irreconcilable positions. Republicans are, in effect, holding the U.S. economy hostage by demanding that Biden agree to a host of poison pills — from massive spending cuts to repealing his signature legislation, the Inflation Reduction Act — before they agree to a debt limit increase.
At the other end of Pennsylvania Avenue, President Biden — chastened by memories of an ill-advised debt limit deal made by President Barack Obama with congressional Republicans in 2011 that slashed spending — is refusing to negotiate. He insists that House Republicans must pass a clean debt limit bill and save the haggling over spending for the annual budget talks. Biden’s position is backed up by the overwhelming majority of congressional Democrats, who view talks with Republicans over the debt limit as akin to negotiating with terrorists. So there is little incentive for Biden to step over his line in the sand.
And truth be told, even if Biden did agree to haggle with Republicans, it’s hard to imagine that any kind of deal could be reached. The two sides could not be further apart. The Biden position is as dogmatic as the GOP’s. By demanding that House Republicans send him a clean debt limit, he is, in effect, insisting that they unilaterally surrender. Not only are Republicans opposed to such a step, but if House Speaker Kevin McCarthy did bring such a bill to the House floor there’s no guarantee that any Republicans would vote for it. Even his caucus’s least extreme members have said no to a clean debt limit.
All that is actually secondary to McCarthy’s other constraint. If he were to do as Biden demands he would almost certainly be replaced as speaker. And as McCarty has made clear for months now, he values the speakership more than anything else — including a potential economic catastrophe.
So if Biden and congressional Republicans cannot agree, that puts the ball in Biden’s court. There are a few potential options for the president. One is the so-called mint the coin strategy. The president would order the U.S. Mint to create a $1 trillion coin, deposit it with the Federal Reserve and voilà, America suddenly has enough money to pay its bills. But considering the potential impact on inflation (though some have questioned that view), the interference in the independence of the Federal Reserve and the sheer kookiness of the plan, it seems unlikely that Biden would consent to such an arrangement.
Don’t get me wrong: This is no way to run a government in a healthy and functional democracy.
The other more realistic option is for Biden to simply order the government to keep borrowing money. To do so he could invoke the 14th Amendment of the Constitution, Section 4, which states, “The validity of the public debt of the United States … shall not be questioned.”
According to a New York Times story this week — which seems like a trial balloon — the Biden administration is seriously considering such a tactic. The idea is not without problems: Republicans in Congress would almost certainly bring a legal challenge, and while the case winds its way through the legal system for an almost certain stop at the Supreme Court, it would likely raise borrowing costs.
But the plan also has a simple elegance that would, ironically, be a political boon for all three branches of government.
Biden would look resolute and decisive and, more important, would avoid an economic catastrophe 18 months before seeking re-election. House Republicans would score points with their base by throwing temper tantrums and decrying Biden as a despot. But they would both avoid a debt default and a tough vote on a debt limit deal. In effect, Biden would jump on the grenade and shield them from the damage.
House Republicans might even then go a step further and impeach Biden, which would likely give a political boost to the overwhelming majority who reside in ruby-red districts. And while impeachment would be distasteful for Biden, it would provide its own political boost — a further piece of evidence to use on the campaign trail for arguing that House Republicans are extreme and out of touch.
What about the legal challenges to executive action? The court’s more right-wing members (Thomas, Alito, possibly Gorsuch) would likely vote to strike down Biden’s order, creating more economic havoc. But if the court wants to neutralize the growing public anger over last year’s decision overturning Roe v. Wade — and the now steady drumbeat of ethics scandals — not plunging the country into economic ruin would be an excellent place to start. Upholding Biden’s order or taking a legal out and saying that no one has standing to challenge the president’s decision would surely take public pressure off the high court. And the move would reassure financial markets that the country will never have to go through the charade of debt limit politics again.
Don’t get me wrong: This is no way to run a government in a healthy and functional democracy. But right now, America’s governing institutions have fallen, and they can’t get up. Avoiding economic catastrophe is an unalloyed good. That Biden can do it while furthering the political interests of all involved makes it a virtual no-brainer. So besides being the best political option, Biden acting unilaterally is, at this point, the only way to avoid default.
Michael Cohen is the publisher of the newsletter Truth and Consequences and hosts the weekly podcast “That ‘70s Movie Podcast.”