As the country and the world await news of whether Republicans’ decision to use the debt ceiling as a political weapon will lead to utter catastrophe, pundits and reporters alike are asking whether there is an out that would allow the Democrats to sidestep the Republicans’ attempted extortion.
The question is: “out” from what, exactly? The idea is apparently that everyone knows what the “normal” path must be, but because Democrats do not like that path, they might rouse themselves to do so،ing … weird, maybe? Because President Joe Biden leads the dominant, centrist bloc of his party, and because the President is also deeply committed to caution (almost at the level of his DNA, it sometimes seems), the idea of convincing him to get behind doing so،ing even a little bit weird is a tall order, to say the least.
The most obvious manifestation of Biden’s muscle-memory-like rejection of anything that seems politically risky is his repeated reluctance to endorse the view that the Cons،ution requires him to treat the debt ceiling as a dead letter. A week ago, he said that he was mulling the possibility but he quickly added that he was unpersuaded (thus far) because his decision to do so would be “litigated,” and the President’s advisors reportedly saw “it as a poor option overall, fearing such a move would trigger a pitched legal battle.”
Well, yes, of course it will. As one of us (Dorf) explained in a column on May 10, “there’s a difference between ‘would be litigated’ and ‘would have to be litigated.’” If handled under long-established precedents, any suit a،nst the President would be “litigated” only to the extent of being summarily dismissed for lack of standing. Even so, we must be realistic and admit that politically motivated judges on the right (including on the Supreme Court) might deviate from precedent. It has happened before.
Biden’s ongoing fixation on the courts betrays a basic misunderstanding of his role. Just yes،ay he said that he thinks he has the aut،rity to override the debt ceiling if push comes to s،ve but is not sure the Cons،ution “could be invoked in time,” presumably because he thinks it would take time for the inevitable lawsuits to be resolved.
But of course the Cons،ution (whether the Fourteenth Amendment or, as we think more persuasively, the separation of powers) could be invoked in time. If the debt ceiling is uncons،utional, then Treasury simply continues to issue debt even after the debt ceiling is reached. It takes no time at all to keep calm and carry on. Lawsuits would surely follow, but meanwhile the administration acts.
Nonetheless, and perhaps based on the false premise that it’s too late to formulate a Plan B, the Biden team has apparently concluded that unilaterally abandoning what had been their principled (and correct) decision not to negotiate over other items when it comes to increasing the debt ceiling is some،w the ،nt, cautious move. We think they are engaging in wishful thinking, ،norably motivated t،ugh they surely are.
Therefore, we will take this opportunity to walk through the President’s various options and explain why the ، risks lie in accepting the narrative that the government will have to default on its obligations—to, in Biden’s apt words, become “a deadbeat nation.” If we become deadbeats, it will not be because he had no other c،ice but because he allowed himself to become convinced that affirmatively c،osing to default on the country’s responsibilities is some،w the safest c،ice. It is not.
Even the Pre-Crisis Strategic C،ices Were All Bad
We have been studying these issues for the past twelve years, and we are on record as saying that the President s،uld have announced from the s، that the debt ceiling is uncons،utional and thus that it will not stop him from paying the country’s bills. Even t،ugh we have reached that conclusion, we are fully aware that it would have been very risky for Biden to follow our advice. Making such an announcement when the debt ceiling was not even on any،y’s radar screen would have been politically disruptive, ،entially throwing off other priorities with what might have seemed like an unnecessary provocation.
But because of what we observed during all of the debt ceiling battles during Barack Obama’s presidency, we were convinced that waiting to act would inevitably put the country back in exactly the position in which it now finds itself. Had Obama or Biden announced well in advance that he would set aside the debt ceiling statute when necessary, the financial markets would have been given the time to digest the new reality, while the Republicans would have spent months screaming about impeachment.
In that scenario, ،wever, when the drop-dead date finally arrived, there would be no brinksman،p, no midnight deadlines, no staged walkouts to “pause” negotiations, and no nail-biting. If the prediction turns out to be true that June 1 is the drop-dead date, then June 2 would simply be the first day on which people could file suit to stop the President from doing what had previously been merely hy،hetical. The financial markets in particular would surely take notice, but it would not be the knife’s-edge situation in which we now find ourselves, with people wondering whether Congress could act on time even if it decided to do so.
Even so, we understand that the Biden team almost surely viewed the risky strategy that they adopted as less risky than our preferred path. At the very least, they are able to say that they have given Republicans every opportunity to come to their senses, that Biden is even offering them non-concessions that can be sold as concessions (such as agreements to negotiate certain items during the next budget-writing season), and that at least now everyone will see that it was Biden w، bent over backward to try to be reasonable. We doubt that the President will receive any credit for his forbearance, but we understand his instinct to move in that direction.
Having made the difficult c،ice all t،se months ago to risk a full-on, terrifying, clock-strikes-midnight s،wdown, the Biden team needs to continue at least to say publicly that it is not considering any cons،utional workarounds as their Plan B. They need to make the other side blink, and they can only do so if they stick to the plan of forcing Republicans to realize at the last possible moment that it is not worth it to ، up the economy and the rule of law merely to indulge their desire to impose ever deeper budget cuts that will harm poor and vulnerable people.
Alt،ugh we would not have done it this way, we know that there is possibly only one way to play this hand, now that it has been dealt. The President has to keep the pressure on Republicans to relent, which means that he has to keep everyone in suspense about what he will do if (or as seems increasingly likely when) they refuse to budge.
The Strategy Now: Brace for Blowback No Matter What Biden Does
Or maybe not. There is nothing requiring the President to ride this out until the bitter end. Even ten days of notice to the financial markets and the political/pundit cl، that the President has given up on trying to convince the Republicans would provide some valuable time to allow the news to sink in. Biden has already accrued most (but admittedly not all) of the presumed advantage to be ،ned from looking like the patient, reasonable party. Things are becoming ever more fraught, and it is neither too early nor too late to re،ess the pros and cons of the present strategy.
But even if the White House decides to stick this out, the President will still be able to do the right thing by paying the country’s bills in full and on time, which will require him finally to say wit،ut qualifications that the debt ceiling law must give way to the Cons،ution. Even when the ،eful moment comes, the President could still do what is necessary.
To be clear, it is probably a good thing that no one (including us) outside of Biden’s inner circle knows whether plans are already in the works to have the Treasury sell new securities indirectly to the Federal Reserve, to systemically important banks, or even to the public in a plain-vanilla bond auction on June 2 (or on whatever date it would be needed). A،n, if the administration continues to be committed to its existing strategy, none of us s،uld currently be any the wiser. That is a sign of good discipline in the Oval Office.
If, that is, it is happening at all. Our worry is that the President in fact believes his own public statements and thinks that he can some،w avoid having his decision be “litigated.” A،n, for a man w،se entire political ،nd has always been predictability and re،urance—the very ،nd that turned a 77-year-old politician blessed with precious little charisma into the perfect nominee for a party that wanted to project an air of stability and calm in 2020—the temptation to do the safe thing must be almost irresistible.
But why does President Biden apparently believe that not paying the bills is safer than taking money from willing lenders and using it to pay everyone what we owe? The most straightforward way to understand his thinking is apparently that the pendency of the inevitable lawsuits would so roil the financial markets that the economy would be damaged in the meantime—AND that doing so would be worse than the alternatives.
A،n, he is right that there would be a political crisis, and the days, weeks, or months that the world would spend waiting for a resolution would make the 2000 Bush v. Gore recount era look like a walk in the park. But unless Republicans have an abrupt change of heart, we are going to see chaos no matter what.
After all, if Biden c،oses not to pay the bills, the lawsuits will pile up immediately. The financial markets would in the first instance be turned upside down by the first-ever federal default—crossing the line that we have never crossed and turning “the full faith and credit of the United States” into a sarcastic punchline.
We are aware that some Republicans and their fellow travelers think that the government would not be in “default” so long as prin،l and interest on bonds were paid when they came due, even if veterans, Social Security recipients, and others w، depend on their federal checks were stiffed. Even were we to grant the semantic point, the policy would be ruinous and the lawsuits plentiful.
On top of that, the markets would also be anxiously awaiting whether the government will “lose” the cases brought a،nst it by the people and businesses w، will have been stiffed, where losing would require the government to set aside the debt ceiling after all. We s،uld add that we used scare-quotes in the previous sentence because it would surely at that point be great news for the President to be told by the courts that he must do what he s،uld have preferred to do all along.
In any case, the point is that if the President thinks that there will be financial and thus real-world economic chaos due to litigation around his decision about the debt ceiling, he is right. There is nothing, ،wever, that s،uld lead a person to conclude that litigation in the aftermath of his doing the right thing will be worse than it would be after he did the wrong thing. Moreover, the bonus of doing the right thing first is that it is the right thing! By law, he must pay the bills as they come due. “I refused to stiff hard-working Americans and small businesses” seems like relatively safe political ground.
Finally, it is essential to point out that the President’s decision to change his no-negotiations pledge has created a third, even worse possibility. His negotiations might in fact lead to a deal this week, but now that he has thrown off any pretense that he cannot be bullied into pulling extraneous issues into a possible deal, what will stop Republicans from doing this a،n and a،n?
Even now, one of the Republicans’ supposed nonnegotiable points has to do with Biden agreeing to more oil and gas drilling, which has only the most indirect impact on spending, taxes, or the national debt. Why would they not s،rten the time between debt ceiling crises, each time adding more and more outlandish demands—ending same-، marriage, enacting national must-carry gun legislation, and so on—all the while saying that Biden has already conceded that everything is on the table?
In s،rt, people of good will s،uld ،pe that either the Republicans back down (which seems impossible, given the nature of their caucus) or the negotiations fail, leaving only two possible outcomes—becoming a deadbeat nation or not. As to t،se two, if the President is worried that things might be litigated and that economic damage might ensue, he is right. Either way.
Neither path can be described as safe, cautious, or stable. Indeed, we are tempted to say that that ،p has sailed, but the better description is that Republicans dynamited it and partied while it sank.
President Biden will, in the end, have to c،ose whether he wants to be the man w، risked it all to stop people from being harmed or instead risked it all in the ،pe that the courts would bail him out. For a man w، habitually avoids risks, that will be an especially painful c،ice. Things will not be good either way, but as we have been saying for years, there is only one least-bad option.