A Prospect newsletter about the debt limit
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Everyone Thinks the Debt Ceiling Is Someone Else's Problem

On today's X-Date, the epidemic of buck-passing breaking out in the
nation's capital

 

 

J. Scott Applewhite/AP Photo

By David Dayen

**** Janet Yellen wants you to know that she's not
responsible. The future litigant in a bondholder case
<[link removed]>
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
<[link removed]>.

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
<[link removed]>
or "consol bonds
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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
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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
<[link removed]>
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.

**Read all of our debt ceiling coverage here**
<[link removed]>

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The Biden administration wants CEOs
<[link removed]>
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
<[link removed]>
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
<[link removed]>,
that gets you about $30 billion.)

Meanwhile, Senate Republicans, led by Mitch McConnell, have completely
begged off
<[link removed]>
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
<[link removed]>,
and senators in both parties largely agree with him. After all, it's
easier that way.

McConnell, meanwhile, signed the letter
<[link removed]>
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.

[link removed]

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
<[link removed]>
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
<[link removed]> 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:

Treasury spreads show that financial market concern is rising
<[link removed]>

Polling shows the public actually wants to handle the budget and the
debt ceiling separately
<[link removed]>

Biden stopping in a frontline Republican district to talk debt ceiling
<[link removed]>

The National Association of Government Employees files a lawsuit
alleging that the debt ceiling is unconstitutional
<[link removed]>

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