Hitting the debt ceiling: what’s supposed to happen next?

Someone should ask John Boehner what comes next.

I find the Jonathan Zasloff-Jack Balkin-Michael McConnell arguments about the legal consequences of hitting the debt ceiling fascinating – in a macabre sort of fashion – but what really interests me is not what the experts think but what the wrecking crew thinks. When Michelle Bachmann (R- Which Planet?) says flatly in her introductory TV spot “I will not vote to raise the debt ceiling,” what, precisely, does she intend to happen next?

Clearly, the Balkin/14th Amendment view is not open to the Republicans who are holding the country hostage on the debt ceiling issue, since under that view they’re holding an unloaded gun. The remaining options seem to be:

1. The U.S. Government defaults on its full-faith-and-credit debt. (That seems to be forbidden by the Public Debt Clause.)

2. The U.S. Government prints currency, or issues some sort of scrip not backed by full faith and credit, to continue making the payments authorized by statute.

3. The President orders that some payments not be made, in order to remain within the debt ceiling. He does so either:

(3a) According to some legally determined set of priorities; or
(3b) At his sole discretion. (That seems to be the Michael McConnell view.)

Either version of Option 3 amounts to a partial shutdown of the government, just as would happen if the Congress did not pass a Continuing Resolution and there were no appropriations in force. In that case, could the President ask federal workers to keep working, paying them in scrip or promising to pay them in currency later? That can’t be done to avoid a shutdown because of the “no-volunteering” provisions of the Anti-Deficiency Act, but those provisions might not apply to activities fully authorized by Congress but not affordable within the debt ceiling.

Again, I’m not asking what will happen, but what the Republicans think will happen, and therefore what they intend to have happen when they vote against extending the debt ceiling. My guess, of course, is that intend to simply criticize whatever the President does. As far as I can tell, no reporter has asked John Boehner or Mitch McConnell “Just precisely what is supposed to happen the day we hit the debt ceiling?” But that seems to me like a fair question.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: Markarkleiman-at-gmail.com

20 thoughts on “Hitting the debt ceiling: what’s supposed to happen next?”

  1. Expecting probing questions from the press, or rational responses from Republicans, is foolish.

  2. As far as I can tell, no reporter has asked John Boehner or Mitch McConnell “Just precisely what is supposed to happen the day we hit the debt ceiling?” But that seems to me like a fair question.

    Easy. Bachmann says “That’s a gotcha question.”
    And segues into some rant about “the sky-debt is falling, the sky-debt is falling, we are all going to die.”

    Mark, we have reached the bottom of the empire barrel.
    It’s all dregs from here on down. And let me tell, it doesn’t look or taste anything like bock beer….

  3. I think the Michael McConnell view is basically correct, except that the administration will probably find some legal standards to determine which priorities after the debt. So what will happen is 3a or 3b, the government continues to service the debt, and has enough left over to pay 30 to 40% of the government’s bills.

    McConnell is also correct that the President’s smart move is to stop sending out Social Security checks as well as eliminating other popular expenditures where the pain will be felt quickly. At this point, the Republicans presumably hope to argue that we’re in situation 3b, and claim that it was Obama’s choice to cut all these popular programs. Plus they presumably like the idea of cutting the government to 1/3 its present size, even if that would be wildly unpopular. The administration will argue that we’re in situation 3a, with the law dictating that there isn’t enough money for the popular programs (e.g., Zasloff’s argument that annual appropriations take priority over entitlements).

    My view is that the President is going to win this argument easily, since it will be obvious that the Republicans created the crisis and also obvious that with less than 40% of the needed money coming in, the government will be forced to make many unpopular cuts no matter what the administration wants. So I think both sides are delusional: neither the Republicans nor Obama seem to realize what a strong hand the President is holding.

  4. It seems that govt shutdowns are all the rage in our era. State, federal, whatever.
    I don’t remember it being this way in US history, say before 1992. (well, maybe some scrip issued in California under Dukemajin?)

  5. Again, I’m not asking what will happen, but what the Republicans think will happen, and therefore what they intend to have happen when they vote against extending the debt ceiling.

    What does any hostage-taker say? “You pay the ransom, or the hostage gets it.” Nobody asks about this because there’s no confusion on the subject.

  6. The most horrifying thing about this predicament is that it’s allowing fundamentally crazy, unhinged people to dominate our national agenda. Whatever happens, these crazies will be able to pin the entire meltdown on the President. Joe America doesn’t understand debt default, sovereign debt, or any of these other somewhat abstract concepts. What he understands is “the economy’s in the tank.” And the blame for this will almost always fall on the President, whether he was responsible or not.

    The results terrify me. Unhinged, crazy people plunge us further into the abyss, which allows them to strengthen their hold on power and push us further into the depths of some paleolibertarian dystopia. Rinse, repeat.

  7. MobiusKlein, if I remember the history, Newt Gingrich and his class in 1992 invented a whole new way to govern. It was based on cynicism, deceit, and bombast. We had thought Nixon was bad back in the 1970s, but even then we managed to maintain some sense of decorum and decency. What Gingrich realized was that decency and playing by the rules no longer mattered. What mattered was the manipulation of power by any means necessary, even abject lies. Democrats have, to some extent, tried to maintain the decorum of an earlier era. But they’re fighting against a team that has thrown out the rule-book and will be as craven as they can possibly be.

  8. So I think both sides are delusional: neither the Republicans nor Obama seem to realize what a strong hand the President is holding.

    What makes you think that Obama doesn’t realize that he has a strong hand? He’s won himself the role as the reasonable compromiser without giving up anything that he hadn’t pretty much said a long time ago that he was willing to give away, or even wanted: large non-benefit cuts to Medicare; some minor twiddling with Social Security; and some discretionary spending. The only real unknowns here are the details of the discretionary spending cuts; what those are make or breaks the deal he’s offered. All I remember is that he agreed to huge cuts to get the continuing resolution passed, all of the liberals freaked out, and then it turned out that the cuts he’d agreed to were a bunch of vapor. I don’t see any reason to assume that there’s much different here. I don’t think it’s going to be enough to get a deal this time, because the Republicans have backed themselves into a corner where they can’t make any compromise. And so, we’re going to end up with choice #1, #2 or #3 and Obama won’t have actually given anything away at all.

    Personally, I’d love it if they can figure out a way to do Alternative #2.

  9. I think Mark Kleiman is asking the same as I have been for a few weeks now: If proponents of raising the debt ceiling (formerly: everybody) are wrong and there is no impending disaster but the debt ceiling is raised anyway, nothing happens except the government continues to meet its debt obligations. If opponents of raising the debt ceiling are wrong, our economy collapses. I am wondering how any elected leader can take such risks simply for ideological purity*?

    Inasmuch as I would like to see a deal be made, I find any deal that adversely effects so-called entitlements, or that continues to guide more and more wealth into the hands of the JOB CREATORS (see: Warren Buffett, Alex Rodriguez, Snookie, et al.) to be unacceptable. I would just as soon see the president invoke the 14th and fight the constitutional battle later, after our debt obligations are secured.

    *Reminds me of something I heard on Diane Rehm several weeks back regarding the GOP primaries. One guest from Cato, or Heritage, Wall Street Journal, or the RNCC, or wherever stated that there is no test for ideological purity amongst GOP candidates. The issue is trust. That is, trust that a given candidate could be trusted to vote the right way in all instances.

  10. In addressing these issues, ask yourself, “What would be most humiliating for the President?” That’s what the Republicans are aiming for.

  11. > What makes you think that Obama doesn’t realize that he has
    > a strong hand? He’s won himself the role as the reasonable compromiser

    Among those who obsessively read/view political news and political blogs, sure. Among the general population? Even the general population of TV news “anchor/reporters”? Ah, no, I don’t think most of the population even knows what this is about – other than ‘debt is bad’.

    Cranky

  12. In logic, when a contradiction is true, then everything is true. The corresponding principle here is when the laws conflict, as they will shortly, then the President can do anything he wants. Perhaps Obama isn’t the man for it, but this is how we are slouching towards rule-by-decree.

  13. If proponents of raising the debt ceiling (formerly: everybody) are wrong and there is no impending disaster but the debt ceiling is raised anyway, nothing happens except the government continues to meet its debt obligations.

    There’s more than one impending disaster at issue here. The US is rather like one of those incredibly fat guys you see occasionally on TV, being lifted off the couch with a fork lift. He’s convinced that if he doesn’t get his next bag of Doritos, there will be an immediate disaster. He’s wrong about this. That doesn’t mean that there isn’t a disaster in the offing if he DOES get his bag of Doritos. There is, it’s just not immediate.

    Nothing happens if the debt ceiling is raised, except that we take that next step towards being completely broke. (Cue the delusional lecture about how nations that issue currency can’t be broke.)

  14. I think a significant number of Republicans believe their own bullshit story: that if they refuse to raise the debt ceiling, there will be massive spending cuts to instantly achieve a balanced budget, and that this will be good for the economy. The rational people remaining in the Republican camp know it will cause a full-blown depression, but think that will be good for them, because deflation enriches the people who are owed money. Or that a depression will make Obama lose, and THAT will be good for them because they can go back to sucking at the government tit.

  15. Back in the prehistorical days of the 80s, ABC aired a movie called The Day After, about the effects of a nuclear war on some of the few survivors in Kansas. (They were, of course, widely denounced as traitors by the usual conservatives.) But what I remember most was an interview a few days later with then-secretary of state George Schultz, in which the reporter asked whether the consequences depicted in the film were unrealistic, and Schultz answered that they were, because “the United States does not accept the possibility of nuclear war.” Hence, Schultz argued, no war could occur, and thus any depiction of a hypothetical war’s results was necessarily unrealistic.

    The issues and the players change, but the vision doesn’t.

  16. “In logic, when a contradiction is true, then everything is true. The corresponding principle here is when the laws conflict, as they will shortly, then the President can do anything he wants. Perhaps Obama isn’t the man for it, but this is how we are slouching towards rule-by-decree.”

    GAHHHHHHHHHHHHHHH!

    We. Are not. “Slouching towards rule-by-decree.”

  17. I would continue to pay the salaries of a few clever people over at OMB whose task it would be to determine what payments/subsidies/outlays are being made in districts and states whose Representatives and Senators voted against the ceiling increase, and then direct the Secretary of the Treasury to suspend all such payments.

  18. I’m sure you would, John. You do realize, of course, that this demonstrates that you regard the federal budget as a political slush fund?

  19. First priority cut if debt ceiling is not raised–freeze payments on Congressional salaries.

  20. Brett, as the local “conservative,” can you enlighten us? What, precisely, is supposed to happen if the debt ceiling is not raised? What spending is supposed to stop the next day, and who gets to decide?

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