If you’re looking for evidence that Republicans will—despite their rhetoric—eventually cave on the debt ceiling, it’s worth noting a recent statement from Rand Paul, to Business Insider, on how he thinks the GOP should approach the ceiling. Rather than force a shutdown, Paul thinks Republicans should pass a bill that would prioritize payments to bondholders if the limit is reached. This would, he says, “force us immediately to have a balanced budget.”
“The only real way to have leverage with the debt ceiling is to convince people that we are not going to default on our debt,” Paul said. “We could actually direct the President to pay our interest, make Social Security payments, pay soldier salaries, the basic functions that could keep government going. That way we take default off the table.” […]
“We have tax receipts to pay for about 70 percent of the government and we’re running deficits of about 30 percent, so what I would say is pay for the 70 percent we would all keep going and stop paying the other 30 percent until we come to an agreement,” Paul said.
Like Karl Rove and other Republicans, Paul says—outright—that he doesn’t want the United States to go into default. Hence this proposal, which would prevent default but also force Democrats to negotiate on Republican terms. Of course, there’s no chance this would move to the president’s desk—Democrats won’t willingly give leverage to hostage takers.
Even still, the mere fact that Paul has floated this bolsters the argument that Republicans aren’t as committed to hitting the debt limit as they let on. If Democrats decide to negotiate—as they did in 2011—odds are good that the GOP will stick to its guns, knowing they can force concessions from the White House. But if Democrats refuse to negotiate—and default becomes a real possibility—then, as Greg argues, you might see Republicans throw in the towel and agree to a clean debt ceiling increase.
The real question, I think, is whether Democrats are able to find a way to permanently move the debt ceiling off of the table. As long as congressional action is needed to authorize borrowing, a party or faction can continue to use the threat of default as a way to extract concessions.
This is why the platinum coin is such a useful idea—it provides the basis for a trade. Republicans agree to abolish the debt limit, and Democrats agree to rewrite the law, and relinquish the coin as a tool. Everyone wins, including the economy.