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Posted at 10:49 AM ET, 01/14/2011

After the debt ceiling vote fails

By Ezra Klein

Great piece by Greg Ip on the various ways the United States could delay defaulting on its debt even if Congress didn't raise the debt ceiling. Congress may get to decide whether to raise the debt limit, but the administration, through the Treasury, decides what to do next. And if they decide to free up money by shutting down government functions and payments, they get to decide which government functions and payments to delay. As Ip notes, in the 1990s, the Clinton administration threatened to stop Social Security checks, which scared Congress into raising the debt ceiling. I'd expect the Obama administration to be similarly targeted in where it makes its cuts, if it comes to that. And Obama's got a lot of "reasonable guy in the room" credibility he could spend on a fight like this.

By Ezra Klein  | January 14, 2011; 10:49 AM ET
Categories:  Budget  
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Comments

Defaulting misses the point. Any action taken in a standoff over the debt ceiling would almost certainly result in a credit down grade for the nation as a whole.

So even if you save hundreds of billions on the deal that eventually comes out, you will lose all that and more in higher borrowing costs.

Posted by: 54465446 | January 14, 2011 11:01 AM | Report abuse

"And Obama's got a lot of 'reasonable guy in the room' credibility he could spend on a fight like this."

You mean it wouldn't automatically become the first step in throwing off the yoke of the Kenyan usurper?

Imagine that.

Posted by: davis_x_machina | January 14, 2011 11:11 AM | Report abuse

Problem is that his idea of "reasonable guy" is the first one to concede.

Posted by: jtmiller42 | January 14, 2011 11:16 AM | Report abuse

The President needs to be more vocal that he will only accept a clean bill to raise the debt ceiling. That he will veto a bill that also attempts to claw back agency budgets to 2008 levels, say, or a bill that also repeals the individual mandate. Or a bill that does both, and more. All this recent talk that Boehner and the Republicans are not going to hold it hostage is just TALK. There is no reason to think that they won't play chicken with it. If a bill like that passes the House, the Senate should block it, but will they? Do they want to be blamed for not raising the debt ceiling? I say there's a very good chance the Senate blocks Boehner's first try, but caves on the second try, which will be only slightly less disgusting. They will likely pass a disastrous debt ceiling bill, and leave it up to the President to veto it. Will he? If he does, who will the country believe prevented the debt ceiling from being raised?

The President needs to start playing--or learning--hardball. Now.

Posted by: andrewlong | January 14, 2011 11:43 AM | Report abuse

What makes this argument sad and funny at the same time is that 99% of those on the right who don't want the debt ceiling raised never mentioned it during the Bush years nor even knew one existed until Fox News told them recently

BUT DAMMIT, THEY DO NOT WANT IT RAISED SINCE OBAMA IS IN OFFICE!

Posted by: Bious | January 14, 2011 1:21 PM | Report abuse

Recent Reuters poll says 71% do NOT want the debt ceiling raised, while only 18% do. If Obama vetoed raising the debt ceiling, his popularity would skyrocket.

Posted by: DavidinCambridge | January 14, 2011 3:49 PM | Report abuse

If they don't raise it, we'll just keep paying our debt obligations (Treasuries, etc) and stop paying "non-essential bills. Even if the countries credit rating is damaged, where else will the world park it's investments? The Yuan? Hardly. The Yen, don't think so. Nope the US$ is the world's reserve currency. Now, the first expense Obama should cut (or threaten to cut) is 100% of Congressional payroll. No pay for House members, Senators and all their staff members.

Posted by: jsfry | January 14, 2011 4:25 PM | Report abuse

No Ezra, and no, Greg Ip, it will be much simpler than that. When the debt ceiling vote fails, the President will call the Congressional leadership and the Supreme Court into the room. His Attorney General will announce a ruling that a default on the debt of the United States would threaten its national security. The president will then step to the podium and say that in his capacity as Commander in Chief he is assuming all emergency powers necessary to prevent default, with these powers to terminate when default is no longer a risk (i.e., when Congress comes to its senses). He'll then announce the necessary cuts (40% of expenditure, it would appear). For instance:
1. furlough everyone on the Federal payroll except the IRS and soldiers in war and their support (especially the janitors that clean Congress).
2. Suspend payments on all weapons contracts
3. Cease all transfers to the states.
4. Suspend Medicare reimbursements (while maintaining the legal requirements on doctors and hospitals).
5. military requisition of estate tax on estates from 2010
[use your own imagination--whatever would cause the greatest howls]
The president then suspends these measures for 48 hours to allow appeal to the Supreme Court (and for Congress to cave).
For extra sauce, all Democrats vote 'present' when the debt ceiling comes back up for a vote, requiring a majority of Republicans for passage, and so, putting this nonsense to rest for awhile.
Ladies and Gentlemen, who wants to play a game of chicken with the President of the United States--and can I place a side bet?

Posted by: emcquarrie | January 14, 2011 11:22 PM | Report abuse

"BUT DAMMIT, THEY DO NOT WANT IT RAISED SINCE OBAMA IS IN OFFICE!" posted by Bious.

AND DAMMIT OBAMA DID NOT WANT IT RAISED WHEN BUSH WAS IN OFFICE:

"The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that “the buck stops here.” Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."


Senator Obama March 20 2006.

Posted by: manapp99 | January 16, 2011 2:39 PM | Report abuse

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