The GOP's Dangerous Debt-Ceiling Threat

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Even for someone unmoved by hyper-ideological, right-wing rhetoric, Senator John Cornyn’s most recent op-ed for the Houston Chronicle is astounding in its mendacity and utter disregard for responsible governance. To wit, after engaging in a little bizarro history—where he blames the president for brinksmanship on the debt ceiling and the fiscal cliff, as if Obama has an obligation to implement the GOP agenda—the two-term Texas lawmaker presents a government shutdown as a responsible way to force spending cuts:

Over the next few months, we will reach deadlines related to the debt ceiling, the sequester and the continuing appropriations resolution that has funded federal operations since October. If history is any guide, President Obama won’t see fit to engage congressional Republicans until the 11th hour. In fact, he has already signaled an unwillingness to negotiate over the debt ceiling. This is unacceptable. […]

The coming deadlines will be the next flashpoints in our ongoing fight to bring fiscal sanity to Washington. It may be necessary to partially shut down the government in order to secure the long-term fiscal well being of our country, rather than plod along the path of Greece, Italy and Spain. President Obama needs to take note of this reality and put forward a plan to avoid it immediately.

Ignoring, for now, Cornyn’s assertion that the United States will end up like Greece—which, as I noted a few days ago, is ridiculous given our ability to print money—it’s worth elaborating on what Cornyn means when he says “shutdown.”

A government shutdown occurs when Congress fails to pass an appropriations bill. Without appropriations, the federal government lacks the authority to operate, and so it doesn’t. Agencies close, workers go home, programs are suspended, and nothing goes on for as long as Congress is at an impasse. This is what happened in 1995, when the Gingrich-led House forced a shutdown, and this is what almost happened at the beginning of 2011, when Boehner led his conference to a similar position.

This isn’t on the table. Rather, Cornyn is referring to the debt ceiling, which is a congressional limit on the Treasury’s ability to pay obligations. If Congress fails to raise the debt ceiling, the government will continue to function, it just won’t pay the people its promised to compensate. Social Security checks won’t go out to retirees, Medicare and Medicaid reimbursements won’t go out to hospitals, payments won’t go out to military contractors, and federal workers will receive an I.O.U for paychecks.

This is why its so dangerous for Republicans to refuse to raise the debt ceiling. Contra Cornyn, keeping the limit low won’t reduce deficits or stop the United States from accumulating debt; instead, it will keep the federal government from paying what it owes to a variety of people and organizations, from bondholders to pensioners. When you stop making payments on your mortgage, the bank comes to take your house. When the government of the world’s largest economy stops making payments on its obligations, financial markets spin into a panic.

In 2011, the mere threat of not raising the debt ceiling was enough to slow economic growth to a crawl, and nearly erase the gains of the previous months. Put another way, what Cornyn has signaled—along with most of the Republican Party—is a willingness to crash the economy and damage the full faith and credit of the United States if President Obama doesn’t adopt core parts of the conservative agenda. Either Democrats slash and dismantle programs for working and middle-class Americans—including Social Security, Medicare, and Medicaid—or Republicans will “kill the hostage” and plunge us into a second global recession.

Oddly, large swaths of the press is treating this as a routine negotiation, and not as an extraordinary and irresponsible threat to our national well-being. In two posts worth reading, Greg Sargent and Alec MacGillis document the extent to which the mainstream media is unalarmed by the GOP’s actions. For example, here’s Chris Cillizza of The Washington Post, “Make no mistake: No deal on the fiscal cliff was a political loser for Republicans; this is an issue they needed to get off the table in order to find better political ground—debt ceiling—to make their stand.”

There’s something very wrong with Washington journalism when a threat to imperil the global economy is treated like a round of capture-the-flag.

Comments

You can always count on Prospect writers for one thing. They have no idea what they are talking about. Failing to raise the debt ceiling does not mean that the US deafults on obligations. It means that the US cannot spend any more money than it takes in. How this is done is entirely up to the government. Defaulting on debt is one option, but that would probably violate the 14th Amendment. Another, more likely option, is to stop operations, starting with the least necessary to the most until outflows equal inflows.

@MetairieORF
I would not be so quick to dismiss Mr. Bouie's analysis. Your alternative solution of "stopping alterations" is likely not a tool at the disposal of the Administration. As Bouie discusses, a government shutdown appears in the event of a failure to pass appropriations (as in 1995) but in the event of a failure to increase the debt ceiling, the government would remain statutorily obligated to spend money as it has been appropriated. It would lack only the resources to pay.

What you appear to be suggesting is referred to as "impoundment." Impoundment is where the executive branch refuses to spend money appropriated by congress. As it turns out, however, the power of impoundment does not exist. It is specifically barred by the Congressional Budget and Impoundment Control Act of 1974. In addition, the principle was tested when President Nixon attempted to refuse to make certain expenditures (concerning limiting water pollution) passed by Congress, but the Supreme Court ruled against him in Train v. City of New York, 420 US 35.

If, on the other hand, you meant to suggest that congress and the administration could work together to increase revenues and/or reduce spending to bring the budget into balance, I would suggest (without regard to whether that level of austerity would be wise) that nothing in recent history suggest such a level of cooperation is a realistic possibility. In any event, it cannot lawfully be imposed by the Administration unilaterally.

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