On 22 October 1985, the treasury secretary, James A Baker III, told congressional leaders that if Congress failed to raise the debt ceiling by the end of the month, the Reagan administration would pay the nation’s bills by taking back treasury securities in which social security had invested.
It was an extraordinary move. Under Baker’s plan, social security would lose interest on its funds.
If Congress still didn’t raise the debt ceiling, the administration would borrow from the railroad retirement and military retirement trust funds.
If the impasse continued, it would begin selling gold from the US gold reserve “even though that could undercut confidence here and abroad based on the widespread belief that the gold reserve is the foundation of our financial system”, said Baker.
An agreement was reached after the Reagan administration had begun raiding social security, but before it took any other measures.
The comptroller general of the United States later found Baker’s raid on social security technically illegal but concluded nonetheless that Baker “did not act unreasonably” under the circumstances.
I recount this history to give you some perspective on the current debt-ceiling crisis.
First, showdowns over the debt ceiling have been going on for a long time.
Second, they have often been fueled by soaring national debts due to Republican tax cuts for the wealthy and big corporations.
The 1985 standoff involved a refusal by Senate Democrats to support a balanced budget, even though it was Reagan’s mammoth spending on the military and huge tax cut that had doubled the national debt in less than five years.
Finally, they have required Treasury secretaries to do extraordinary things to keep paying the nation’s bills notwithstanding, sometimes technically illegal.
Hence, there have never been “X-dates” at which time the treasury runs dry. There are just ever more extreme government bookkeeping measures.
But here’s the difference this time. Previous standoffs have been carefully crafted dramas in which both sides demonstrate their commitments to their position, knowing full well how the play will end – with the debt ceiling lifted.
This time, though, gonzo lawmakers like Marjorie Taylor Greene and nihilists like the current Republican frontrunner for president have considerable influence.
And unlike Bob Dole in 1985, these players have no real commitment to cutting the government debt. (Were that their goal, presumably they wouldn’t have supported the massive 2017 tax cuts for the wealthy and big corporations that fueled the debt, or would now urge its repeal. And they certainly wouldn’t demand cuts in staffing for the IRS, which House Republicans are also now doing.)
Their only commitment is to power – gaining dominance over, and submission from, Democrats, progressives, putative “coastal elites” and so-called “deep state” bureaucrats.
For them, this is not play-acting. It’s not for show. It’s for real. If they don’t get their way, they’re prepared to blow up the economy.
In fact, as the so-called X-date looms ever closer, their demands have only escalated.
Which is why it’s critical for Biden to continue paying the government’s bills and for the treasury secretary, Janet Yellen, to continue using every bookkeeping scheme imaginable to find the means to pay those bills.
They must never declare an “X-date”, and never default.
If Kevin McCarthy and his band of radicals don’t like this, let them take the Biden administration to court.
Let House Republicans argue in the courts that the 1917 act establishing the debt ceiling has precedence over section 4 of the 14th amendment, which requires that the “the validity of the public debt …. shall not be questioned.”
Let them claim that the debt-ceiling act takes precedence over other acts of Congress that require the president, for example, to pay interest on the federal debt, distribute social security benefits, and pay bills from defense contractors and everyone else who has relied on the full faith and credit of the United States.
Let McCarthy and House Republicans make the case before the courts that they have standing to sue Biden for paying the government’s debts as they come due.
Finally, let McCarthy, Marjorie Taylor Greene, and the other loonies demand openly and publicly in court that Biden not honor the full faith and credit of the United States – with the predictable results that the cost of borrowing soars, bond markets crash, the stock market plummets, the global economy is in turmoil, the dollar’s status as the world’s major currency is up for grabs, America is plunged into a deep recession, and millions of jobs are lost.
In other words, leave it to McCarthy and House Republicans to seek to enforce their dangerous nonsense about the debt ceiling – so Americans can see clearly what they’re up to.
