Photo-Illustration: Intelligencer; Photo: Anna Moneymaker/Getty Images
the national interest

Debt Ceiling Extortion Is an Attack on Democracy

If Republicans want to cut spending, they should win an election and do it themselves.

Photo-Illustration: Intelligencer; Photo: Anna Moneymaker/Getty Images

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When President Biden was trying to pass his Build Back Better program, one of the main objections centered on its democratic legitimacy. Yes, the bill’s critics conceded, voters had given Democrats control of the presidency and both houses of Congress. But did they really want sweeping policy change? Did the Democrats have any right to rest such broad legislation on such narrow legislative majorities?

The skeptics conceded that Biden had spelled out all his plans during the campaign, but they suggested people had entrusted his party with power for other reasons. These arguments proved compelling not just to Republicans but even to centrists and some moderate Democrats. “Nobody elected him to be FDR. They elected him to be normal and stop the chaos,” complained Abigail Spanberger, a Democrat of Virginia.

In the wake of the midterm elections, Republicans are likewise flexing their newfound power. The House is threatening to precipitate a financial crisis by refusing to lift the debt ceiling unless Biden gives them … something. They have not decided what, but the most radical members are demanding transformational change, as any change on a scale sufficient to deliver the country from what they describe as existential peril would have to be.

The coverage of this demand has been consumed with the practical consequences of a potential default. What has gone largely unremarked upon is the blatant violation of democratic legitimacy this hostage scheme entails. After all, while it’s true Biden won narrowly, he did win an election, he did carry both chambers of Congress in 2020, and he did spell out his domestic program during the campaign.

Republicans, on the other hand, lost ground in the Senate and have not won the presidency. They wish to use their narrow control of one chamber now to force the entire elected government to accede to sweeping domestic change that almost nobody campaigned on, or even mentioned, last fall.

The Republican Party is plotting a series of cuts — to programs like Medicare, Medicaid, and Social Security — without even going through the pretense of obtaining a mandate. Rather than campaign on a platform of shrinking social-insurance programs, they ignored this question almost entirely, failed to win either the presidency or the Senate, and have responded to this defeat by attempting to force through their radical program anyway by exploiting a quirk in federal law.

This is not just a threat to the global economic system or to the welfare state. It is a challenge to democracy itself, an attempted domestic-policy coup.

The pretext for the Republicans’ extortion gambit is that they have suddenly discovered an imminent fiscal crisis that they are required to address. “The national credit card is almost maxed out,” declared party apparatchik Hugh Hewitt, “and a new spending limit must be obtained.”

This is not remotely true. To have your credit card maxed out means you can no longer borrow money. The U.S. government can in fact still borrow money. What Hewitt’s party is proposing is to willingly become a deadbeat by refusing to pay the bills they have already rung up, despite having the ability to do so.

In a similar vein, here is Kevin Hassett, the author of Dow 36,000 and former Donald Trump economic adviser, explaining why he has suddenly discovered a crisis so urgent that his party must put a gun to the head of the global economy. “The fact is that if we don’t change the trajectory of our fiscal policy soon, we will inevitably suffer a Weimar Germany–style collapse of our currency,” he writes in National Review. “The truth is that brinkmanship now is the only thing that can save us from catastrophe.”

In his recent capacity as Trump economist, Hassett helped craft the fiscal agenda for an administration that increased the national debt by nearly $5 trillion. When Hassett was demanding Congress pass a gigantic tax cut for business owners and heirs to large estates, he insisted there was no need to offset the costs because the cuts would pay for themselves. This prediction proved completely false.

When they were passing the Trump tax cuts, virtually the entire Republican Party, all the way out to Susan Collins, chose to believe Hassett’s prediction rather than listen to the non-voodoo economists who predicted significant revenue loss. This position conveniently allowed Republicans to avoid the difficult work of finding offsetting cuts to pay for their tax-cut spree.

Suppose, instead, that they had been forced to pay for the tax cuts. And suppose they informed the public that, in the event Hassett’s idiosyncratic supply-side analysis proved wrong once again, they would respond by demanding cuts to popular entitlement programs. What are the odds the tax cuts could have passed Congress? Or, if they had, how would the midterm elections have turned out?

The current round of hyperventilating about the deficit they helped to create is simply the implied funding mechanism slipping into place. First they deny that any trade-off exists, knowing full well that the trade-off would make their policies utterly toxic. Then, rather than take responsibility for the choice, they put a gun to the head of the next Democratic president and order him to do it for them, upon pain of melting down the economy.

The entire two-step is a way to get around the problem that the voters absolutely refuse to abide their fiscal priorities.

The House Republican caucus’s most militant faction has received most of the credit, or blame, for this standoff. What is more concerning is the fact that even the most moderate Republicans believe their party is within its rights to use the debt ceiling as a hostage. The argument within the party centers on the proper size of the extortion demand.

“President Biden, to say he’s not going to negotiate, defies the reality of his situation,” intones Chris Christie. “He lost the House. He’s got to negotiate. And so to say that the Republicans would be the obstructionists, well, now you have divided government and you have to — both sides are going to have to give.”

“When President Biden says he’s just going to refuse to negotiate with Republicans on any concessions, I don’t think that’s right either,” says Representative Don Bacon, one of the most moderate Republicans in the House. “But on our side, we have to realize, we control the House with a four-seat majority, the Senate is run by the Democrats with a one-seat majority, and the president obviously from the Democrat Party. So, we can’t get everything we want either.”

Extremists want a huge ransom, while “moderates” urge them to settle for a smaller one. No important faction within the party publicly questions debt-ceiling extortion on principle.

The assumption behind this “realistic” stance is that, under divided government, the congressional party always holds the debt ceiling hostage. But this is clearly false. Democratic-run Congresses may have postured over the debt ceiling, or used it to attach measures that both parties supported, but they never threatened to hold it up unless the Republican president gave them an otherwise-unacceptable demand.

As Donald Trump explained in 2019, “I said, I remember, to Sen. Schumer and Nancy Pelosi, ‘Would anyone ever use that to negotiate with?’ They said ‘absolutely not.’ That’s a sacred element of our country. They can’t use the debt ceiling to negotiate.” Democrats understood that, if they wanted Trump to sign into law policy measures that Democrats wanted, they had to accept some policy measures Republicans wanted.

It is obviously true that, under divided government, the president and the opposing party must routinely negotiate over policy. But the moderate argument isn’t that the two sides both need to give ground on taxes or spending. It’s that the president needs to give Congress policy concessions in return for Congress not triggering a financial crisis. Marjorie Taylor Greene may be asking for too big a ransom, they concede, but Joe Biden’s position that he should pay no ransom at all is equally unreasonable.

This widespread, putatively reasonable stance has two main flaws: one practical and one moral. Begin with the practical. Any bill to raise the debt ceiling must be brought to the floor of the House, which in turn means it must have the approval of Republican Speaker Kevin McCarthy.

Is McCarthy really going to let the House vote on a compromise debt-ceiling plan containing just a wee little ransom for his party? Almost certainly not. Republican hard-liners would take any ransom negotiation with Biden as evidence that their party has real leverage and would denounce any deal as a treacherous sellout. Any ransom payment that Biden considers small enough to be acceptable would by definition be considered too small for the Freedom Caucus. “Anything acceptable to Democrats is unacceptable to us” has been the Freedom Caucus’s animating premise for its entire existence.

So any bipartisan debt-ceiling deal would almost certainly depend on McCarthy facing down a right-wing revolt and putting his job on the line. That McCarthy would nobly place his job on the line for the greater good is not, to say the least, the safest assumption.

The other method of passing a debt-ceiling bill through Congress is to use a “discharge petition” to bring a plan supported by Democrats and a handful of dissident Republican moderates to the floor over McCarthy’s objections. But not only are Republican moderates refusing to support a clean debt-ceiling bill, the timing of such a maneuver would be prohibitive. It takes weeks for a discharge petition to clear the assorted hurdles in House rules. The only way Republican moderates would support such a maneuver, assuming they would at all, would be after negotiations had broken down, which would be at the last minute— far too late.

So what solutions can work? There are at least three ways Biden can act unilaterally to avoid a crisis. One is to use the Treasury Department’s congressionally granted authority to mint platinum coins of any domination, which could cover the government’s obligations in the event of a debt-ceiling breach. Congress may not have intended to give the Treasury secretary unlimited authority to avert debt-ceiling crises, but it also didn’t intend to build a self-destruct button into the global financial system. The second is selling premium bonds (Matthew Yglesias explains the details, if you’re curious). A third is for the president to simply declare he will ignore the debt ceiling, since it conflicts with other laws passed by Congress, and because the 14th Amendment states “the validity of the public debt of the United States … shall not be questioned.”

I have no particular preference for one of these methods over the others. All three strike me as more likely to succeed than any plan to get a bill through Congress, even though conventional wisdom deems legislation realistic and executive action fanciful.

The actual power dynamics suggest Biden has a much better chance to prevail through executive action than through Congress. The only body with the power to block his unilateral moves is the Supreme Court. Yes, the Supreme Court is controlled by fairly partisan Republicans, who probably would like to see Biden forced to pay a ransom to their party’s congressional wing. But if Biden acts unilaterally on the cusp of a debt-ceiling crisis, it will be far too late to revive any ransom negotiations. The only options the Court will be able to choose between on the eve of insolvency would be to allow Biden to avert a crisis or to plunge into the crisis. There is very little in Brett Kavanaugh’s background to suggest a taste for unleashing global economic chaos out of some esoteric commitment to a countertextual reading of the United States Platinum and Gold Bullion Coin Act of 1995.

One oft-forgotten lesson of modern history is how easily exertions of executive power go from silly to banal. The idea Donald Trump could build a border wall after Congress explicitly decided not to fund one seemed preposterous, until he did it. As Josh Barro points out, the “extraordinary measures” that the Treasury Department now uses routinely in the run-up to debt ceiling limits — those measures are being implemented right now — were once considered controversial and more-than-plausibly illegal. Biden has tools that, on their face, are more legally defensible.

None of Biden’s executive actions are foolproof. They are all far more likely to succeed than finding a mutually agreeable ransom payment.

The moral problem inherent in the ransom plan is far more severe than the practical one. Why should Republicans be rewarded for their willingness to risk a global economic meltdown? On what basis does their appetite for national destruction entitle them to a policy win? (Creating a commission that can only make recommendations would not be a policy win – for the same reason, it is unlikely to be acceptable to House Republicans.)

Michael Strain, the director of economic-policy studies at the center-right American Enterprise Institute, has explicated the mainstream Republican argument. While disavowing the far right’s most extreme hostage demands, Strain proposes Biden “should acknowledge the more widely shared Republican argument that federal spending has reached problematic levels — a conviction founded at least partly on the American Rescue Plan’s role in sparking inflation — and they should then find some spending that can be cut” as a trade for raising the debt ceiling.

Strain scolds Biden for having passed an economic-relief plan that contributed to inflation. But the American Rescue Plan merely followed previous rescue plans signed into law under Donald Trump. And Trump’s presidency also added trillions of dollars to the budget deficit on top of the COVID-relief plans.

Strain’s premise that somehow Democrats bear some moral culpability for the deficit, requiring them to make a sacrifice, is backward. It was the Republican administration that enacted permanent tax cuts; Biden’s signature permanent domestic legislative, the Inflation Reduction Act, was more than fully paid for with tax increases.

The “widely shared Republican argument” that Strain says Biden should accept defines the deficit as a problem that tax cuts did nothing to create and that tax increases could not do anything to alleviate. The Republican fiscal posture is built upon a kind of doublethink that permits wild sprees of profligacy when they hold power, followed by hysterical fiscal apocalypticism when they leave office. The purpose of this method is to force Democratic presidents to enact, at gunpoint, the unpopular spending cuts Republicans are too scared to enact themselves.

A leaked slide from a House Republican meeting showed the party agreeing to cut “mandatory spending,” which means programs like Medicare, Medicaid, Social Security, and anti-poverty programs. They have assiduously avoided any specifics, creating a bizarre situation where Republicans are holding a hostage and refusing to name a ransom.

One column in The Wall Street Journal proposes Republicans require cuts to domestic spending while “leaving Democrats to designate what nonmilitary programs to cut.” This seems to get the closest to the party’s desire: to slash domestic spending while making the Democrats politically responsible for it. The purpose of this strangely elliptical hostage standoff is to negate the basic democratic function of allowing voters to assess the policy choices of their elected officials. Republicans desperately want Democrats to be liable for their own unpopular decisions.

Republican spending hawks sometimes complain about their party’s refusal to follow through on fiscal discipline when it holds power. But the availability of debt-ceiling hostage-taking creates a moral hazard enabling this behavior. Republican presidents can lavish the rich with tax cuts without taking responsibility for the trade-offs, believing they can always extort the cuts out of Democrats later.

The Republican penchant for extortion methods is a natural consequence of the party’s elite’s deeply unpopular fiscal-policy agenda. Unlike the mainstream center-right parties throughout the democratic world, all of which accepted the postwar welfare state, the Republican Party has never truly come to terms with the legitimacy of the New Deal. They consider the Democrats’ defense of entitlement programs “demagoguery,” and they consider progressive taxation little better than mob rule, likening it with revealing frequency to Hitler’s treatment of the Jews.

The conservative movement’s refusal to accommodate the public’s preference for a welfare state financed by progressive taxation has made it a fertile ground for authoritarianism. Trump is just one manifestation of this desire by Republican elites to get around the public’s refusal to endorse their core economic-policy commitments. Their regular use of hostage threats is another.

If Republicans wish to cut social spending to finance tax cuts for the rich, they should win some elections and try it. They keep trying instead to force Democratic presidents to do it against their will because they believe they can’t get the public’s support for their agenda and have convinced themselves they shouldn’t have to.

Biden’s confrontation with Republican extortionists is not just a defense of the value of the dollar or the health of the global economy. It is a fight to defend the principle that the people should decide their own affairs.

Debt Ceiling Extortion Is an Attack on Democracy