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Janet Yellen wants you to know that she’s not responsible. The future litigant in a bondholder case reiterated the line that she’s taken throughout the debt ceiling crisis, that only Congress can deal with the situation. When asked about the 14th Amendment stricture that “The validity of the public debt of the United States, authorized by law … shall not be questioned,” Yellen said simply, “What to do if Congress fails to meet its responsibility? There are simply no good options.”
Now, of course she’s going to say that. “No good options” does not mean not considering that option, just that it could be invoked in a least-worst scenario. Even President Biden hasn’t ruled that out.
Judged against default, the (perhaps temporarily) higher borrowing costs that could result from the uncertainty of invoking the 14th Amendment look pretty good. So do premium bonds or platinum coins or “consol bonds” that never mature; all of these risk higher borrowing costs, but default is surely worse.
And Yellen surely knows this. She has been dismissing but not rejecting these options for months. If her position is that Congress must do its duty, she of course will not entertain alternative possibilities, because then the leverage for Congress to act goes away. It would be an invitation to irresponsibility. Yellen is on the record in a 2013 conference call when she was vice chair of the Federal Reserve making contingencies in case of a debt ceiling catastrophe. Speaking about extraordinary measures, Yellen said, “I wouldn’t be eager to do them, but I wouldn’t say ‘never.’”
So I’m not super worried about Yellen passing the buck to someone else as the crisis deepens; that’s literally her job at this point. What does worry me is how many other players in this drama are doing the same thing.
The Biden administration wants CEOs to make their case that the debt ceiling must be lifted for them. That certainly would raise the pressure on Republicans, but that’s something Democrats should be perfectly capable of doing on their own. Besides, Republicans are in a pretend fight with CEOs right now, and would love the opportunity to “prove” their lack of fealty to the business community by rejecting the C-suite request.
House Republicans, led by Speaker Kevin McCarthy, have called for negotiations all year, but it’s clear they want a one-minute negotiation where the other side agrees to all their terms, in the form of the bill they only were able to pass because two House Democrats were absent. Some more moderate Republicans told Axios they were worried that any climbdown from the heights of that bill will be thoroughly rejected by the Republican caucus, because they’ve been so hyped up by the temporary victory. The fact that these moderates refuse to divulge their names in public is its own form of buck-passing, refusing to take responsibility and reset the realm of the possible. (By the way, the moderates said just what I said, that clawing back unspent COVID funds is the only realistic concession in that entire bill, and as I noted last week, that gets you about $30 billion.)
Meanwhile, Senate Republicans, led by Mitch McConnell, have completely begged off even participating in this slow-motion disaster. He’s going to attend tomorrow’s talks at the White House, but insists that the president and the Speaker need to reach agreement, and he won’t play a role in getting there. This also blocks Chuck Schumer from playing any role, which maybe he likes as well. “There is no solution in the Senate,” McConnell has said, and senators in both parties largely agree with him. After all, it’s easier that way.
McConnell, meanwhile, signed the letter from 43 Senate Republicans (enough to sustain a filibuster) stating that the debt ceiling cannot pass without “substantive spending and budget reforms,” while backing off from any responsibility to name those reforms. There’s a theory swirling around Washington that McConnell is waiting for everything to collapse, only to swoop in and become the savior. But news flash: Things have collapsed, and McConnell is still noodling on his fiddle, Nero-style.
About the only person in Washington who hasn’t been completely paralyzed by the situation is House Democratic Leader Hakeem Jeffries with his discharge petition gambit to get a clean debt ceiling vote on the House floor, despite McCarthy’s objections. But that concept is a bit of a mirage, given that Democrats can’t start collecting signatures until May 16 and must wait seven legislative days after getting 218 members to sign on, if they even can. The math means that the entire thing would have to come together on May 16; a glance at the House schedule shows that May 16 is first of only seven legislative days left in the month, and the X-date is set for June 1.
Blame-shifting is typical for the debt ceiling. Everyone wants it passed, but nobody wants to be the one that passes it. That probably means it shouldn’t exist as a requirement, but nobody wants to make that leap, either. The charitable interpretation is that Washington assumes so much innumeracy among the public that they think they will somehow be politically punished for voting to increase the borrowing limits. There’s no indication of that ever happening. The less charitable interpretation is that nobody in Congress ever walks by a loaded gun without picking it up. Getting concessions in crisis that you could never get on a normal vote is just the way we live now.
So here we sit, waiting for the realization that policymakers might have to actually take action to fix this mess.
Here’s some further reading:
