Our US Constitution reads in Article IV, Section 1:
“Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State. And the Congress may by general Laws prescribe the Manner in which such Acts, Records and Proceedings shall be proved, and the Effect thereof.”
Explains James Chen of Investopedia, “In this instance, ‘full faith and credit’ refers to the full borrowing power of a government that pledges to fulfill its payment obligations in a timely manner. The U.S. Treasury issues bills, notes, and bonds as a means of borrowing money from the public to fund the government’s capital projects.”
Economists are sounding the alarm on the debt ceiling, or debt limit, which is the total amount of money the federal government is allowed to borrow through the U.S. Treasury to pay its existing legal financial obligations. That limit is purely a construct of Congress, implemented in 1917 to make responding to WWI needs simpler.
Some of those financial obligations include Social Security payments, Medicare benefits, military salaries, tax refunds, and interest payments on the national debt.
The current U.S. debt ceiling is $31.3 trillion.
In Forbes magazine, Anthony Tellez notes that Treasury Secretary Janet Yellen has written a letter to Congress warning that “the debt ceiling will be hit in early June, and the Treasury will have to take ‘extraordinary measures’ to prevent the U.S. from defaulting on its obligations.”
Tellez continues: “Immediate measures Yellen expects to implement would be to suspending new investments to the Civil Service Retirement and Disability Fund (CSRDF) and the Postal Service Retiree Health Benefits Fund (Postal Fund); and to suspend reinvestment of the Government Securities Investment Fund (G Fund) of Federal Employees Retirement System Thrift Savings Plan.”
That would be like suspending Kentucky’s teacher pension payments and state employee retirement benefits, which account for billions of dollars per year in Kentucky. Do you think that would affect our state’s economy? Would you consider that draconian? Or economic blackmail?
The 2011 episode
We’ve done this dance before. “In 2011, a standoff between Republicans and former President Barack Obama about raising the debt ceiling led to a plunge of stock prices, spiking mortgage rates, and a drop in consumer confidence and small-business optimism, according to a report from the U.S. Treasury,” states Tellez.
The lesson: Don’t negotiate with those who would employ economic blackmail.
That includes the current GOP in Washington, who have signaled yet again they are ready to breach the debt ceiling.
In the 2011 round of debt ceiling negotiations, when the Republican Tea Party came to town to repeal Obamacare, Sen. McConnell stated, “I think some of our members may have thought the default issue was a hostage that’s worth ransoming. And it focuses the Congress on something that must be done,” he told The Washington Post, as reported by Tellez.
McConnell continued, “Never again will any president, from either party, be allowed to raise the debt ceiling without being held accountable for it by the American people and without having to engage in the kind of debate we’ve just come through.” Hypocritically, though, McConnell and the Republicans raised it in 2017 and 2019 — during the Trump administration — without a fight.
And now in 2023
But with a Democrat in the White House, once again the Republicans are actively working to breach the debt ceiling. And to make matters worse Sen. Manchin (D-WV) has been embracing the GOP’s ‘economic blackmail.’
A week before the midterm elections, Manchin was speaking at a Fortune CEO conference, criticizing the nation’s “crippling debt.” After saying that Social Security, Medicare, Medicaid, and other programs are going bankrupt, he stated, “If we can’t come to grips of how we face the financial challenges this country has, then we’re all going to be paying a price that we can’t afford.”
It should be obvious: Democrats work hard to have the federal government provide benefits to our people; Republicans work hard to take those benefits away by using the debt ceiling as a pretext to cut government services.
Today’s Republican-controlled House is already using the debt ceiling as an opportunity to press for major spending cuts, with House Speaker Kevin McCarthy calling on President Joe Biden and Democrats to enact cuts to Social Security and Medicare.
President Biden has said that he will not negotiate, and Congress must raise the debt ceiling ‘clean’ with no strings attached.
By the time you read this, the U.S. may have hit its debt ceiling without any resolution. It appears that the 15 Republican “insurrection” supporters and election deniers made Speaker McCarthy accept a ‘deal with the devil’ to get the Speakership. (Yet another example about personal power first, country last by Republicans.)
The new House rules include getting rid of the modified Gephardt rule, which allowed the House to evade a direct vote on raising the debt limit by including the adjustment in the annual budget. With that rule gone, Republicans can now demand terms to vote to increase the debt limit – thus, economic blackmail.
In “McCarthy's devil deal comes to light: Letting the nation breach the debt ceiling,” written by Joan McCarter in Social Security Works, she explains “The secret deal Kevin McCarthy made with the Freedom Caucus for his speakership will allow the debt ceiling to be breached, and then to direct the Treasury Department on how to prioritize debt payments. The GOP has been promising since before last fall’s midterm election that they would make debt ceiling a fight and would demand those cuts. They followed through with new House rules to reinforce that. What they hadn’t said out loud was that they were willing to do the unthinkable: Force a debt ceiling breach.”
According to McCarter, “the GOP proposal would call on the Biden administration to make only the most critical federal payments if the Treasury Department comes up against the statutory limit on what it can legally borrow.” The payments would include interest payments on the debt, and possibly Social Security, Medicare and veterans’ benefits, as well as funding the military.
The federal government would no longer have the power to borrow to fund programs that Congress has already authorized. It’s a government shutdown combined with a global economic panic because the U.S. had finally defaulted for the first time. Economists warn that not raising the debt limit could cause the United States to default, sparking a major panic on Wall Street and leading to millions of job losses.
A larger problem for the nation: We’ve been here before in 2011 and 2013, and the Treasury Department was very clear in explaining that it doesn’t work that way – you can’t juggle the payments around when you are making millions of separate payments every single day, and ‘prioritization’ is just default by another name. The Republicans want to play this game of ‘prioritization.’
Maybe Neil Bradley, executive vice president of the U.S. Chamber of Commerce, could have some sway with these Republicans. “Prioritization doesn’t work. We had this discussion a decade ago,” Bradley said. “If the U.S. government skips its payments to America’s seniors or skips its payments to bondholders, the ‘full faith and credit’ of the United States government and our commitment to paying our bills becomes just another lie. And both have catastrophic economic consequences.”
White House Press Secretary Karine Jean-Pierre told reporters, “We’re not going to do any negotiations. And it should be, again, done without conditions.”
Senate Majority Leader Chuck Schumer (D-NY) and House Democratic Leader Hakeem Jeffries (D-NY) issued a joint statement: “Default forced by extreme MAGA Republicans could plunge the country into a deep recession and lead to even higher costs for America’s working families on everything from mortgages and car loans to credit card interest rates.”
McCarter also notes that Rep. Brian Fitzpatrick (R-PA), the co-chair of the bipartisan Problem Solvers Caucus, is opposed to this whole plan. He said, “I will tell you that we will not allow our country to default on our debt. The full faith and credit of the United States is what gives us the position we hold in the world. So that’s off the table. We’re not going to default. We cannot allow ourselves to default.”
Stopping the blackmail with a discharge petition
One way for regular House member to shut down the blackmail is a discharge petition. This is a way for House members to force legislation out of committee and onto the floor, bypassing opposition from leadership. The problem with this approach is the time it takes – at least three months, and that’s if leadership doesn’t use maneuvers to slow it down.
Yellen informed Congress on Friday that the department will begin its extraordinary measures — the payment shuffling it can do on a short-term basis to avoid default — this week, and estimated that those measures will only last until early June. That means that members need to organize a discharge petition immediately to have any prayer of it working.
Why are Repubs doing this?
Remember, failure to increase the debt ceiling would not do anything to limit future debt. It would simply force the United States Treasury to default on its existing bonds.
Why are Republicans making this threat?
Because they have spent nearly a century resenting that Social Security works. It is a model of a simple, universal, and overwhelmingly popular government program. Our Social Security system puts the lie to Republican insistence that private corporations are more efficient than what we can do together.
“Social Security and Medicare, put in place by Democrats, are overwhelmingly popular. So while Republicans have wanted for decades to cut, privatize, or otherwise destroy them, they have never been able to overcome the significant popular backlash to those cuts,” McCarter reports.
Let us remember the cautionary tale of 2011. That time, President Obama attempted to negotiate with Republicans to raise the debt. Those negotiations prolonged the Great Recession, led to the downgrading of the United States’ credit rating, and nearly resulted in cuts to Social Security and Medicare.
Say No to economic blackmail
America is a democracy – we should not allow government-by-hostage-crisis to become routine.
President Biden must make it clear: Raising the debt ceiling is the basic minimum that we expect from Congress. He and the Democrats must stand firm.
Economic blackmail with our nation’s full faith and credit? Maybe in Russia – but not here, not now, or ever.
Written by John James Alexander, a pseudonym for a long-time Kentucky educator.