The Approaching Debt Ceiling: a Ticking Time Bomb for the Economy

Leading up to Thanksgiving, the attention of the media and the public was been focused on a variety of subjects: passage and signing of the Bipartisan Infrastructure Bill, the pain of inflation and the supply chain blockage, subpoenas from the January 6 Committee, and the drama of the Rittenhouse and Arbery trials. The joys of the Thanksgiving weekend were rudely jarred by alarming news of the Omicron variant. At the same time, another event of crucial importance has been largely ignored: the rapidly approaching collision with the debt ceiling, estimated to occur in less than three weeks, on or about December 15.

If the debt ceiling is not raised or suspended before then, the economic consequences would be devastating for the United States and the global economy. Virtually no one, Republican or Democrat, disagrees with that fact. And yet the armies of Tweedledees and Tweedledums on Capitol Hill slumber on. Republicans have insisted that Democrats assume the entire responsibility for dealing with the debt ceiling by acting through the reconciliation process. Democrats, however, have objected that Republicans should participate given the staggering deficits run up during the Trump administration, and complained that the reconciliation process is cumbersome and time-consuming.

The media, the public and the stock market evidently assume that, given the consequences, Congress will somehow stumble its way out of this predicament at the last minute. I certainly hope that will be the case but, to borrow an old expression, this is a “helluva way to run a railroad,” let alone a country.

The debt ceiling is a self-inflicted wound on the body politic. It has proved utterly useless as a tool to assure fiscal responsibility. Rather, it has become a plaything of partisan politics, a weapon to be brandished periodically whenever one or both of the parties are in the mood for combat. The most sensible course would be simply to abolish the ceiling altogether. Because that straightforward action would be too easy a target for demagoguery, various other strategies have been proposed. Perhaps the most viable is one that appears in a pending bill that has significant support in Congress. That bill would transfer authority to lift the debt ceiling to the Treasury Secretary, while giving Congress the ability to override the Secretary’s decision.

One of the more bizarre suggestions was reported by NBC News:

Some policy experts and lawmakers have also floated the idea of a $1 trillion platinum coin minted by the federal government and deposited in the Federal Reserve, which the government could then use to pay down the nation’s debt. [Treasury secretary Janet]Yellen rejected this proposal in early October.

“I’m opposed to it and I don’t believe that we should consider it seriously,” she said in an interview on CNBC. “It’s really a gimmick.”

Given current polarization on Capitol Hill, any legislative solution seems unlikely any time soon with virtually no chance of one before December 15. The only glimmers of hope appear in the facts that Majority Leader Chuck Schumer and Minority Leader Mitch McConnell have had discussions in search of finding a resolution, and indications that McConnell may be open to a streamlined resolution process. Such indications were the basis for a Verdict column by Professor Michael Dorf with the optimistic title “Democrats Should Accept Mitch McConnell’s Debt Ceiling Offer as Holiday Gift.” After a thoughtful analysis of the alternatives, Dorf concluded:

It is understandably maddening to Senator Schumer and other Democratic senators that their Republican colleagues are playing chicken with the economy, but that’s no reason to play along. Democrats should accept without further delay Senator McConnell’s offer of a streamlined process to pass a debt ceiling increase via reconciliation.

Whether McConnell’s offer is solid and practicable, and, if so, whether Democrats will accept it, remains to be seen. The rest of us are left hoping for the best. Seat belts should be fastened.