The United States government has hit the nearly $31.4 trillion debt ceiling and Treasury Secretary Janet Yellen informed congressional leaders she’s taking extraordinary measures to pay the government’s bills. But according to Rep. Don Bacon, R-Neb., negotiations on Capitol Hill to increase the ceiling and avoid a default have still not started.
“Not yet, unfortunately. And I totally agree that a default would be bad for our country, bad for economy. We’re the world’s superpower. And we don’t default on our spending and our obligations,” Bacon said in an interview with NPR. “Neither side should expect to get 100% here. But we’ve got to sit down and have a handshake deal. But I’m discouraged by the fact that the president right now is refusing to negotiate. And that’s not a good way to start.”
The White House has repeatedly said they will not negotiate and urged Congress to pass a clean debt limit increase without any strings attached.
“It is essential for Congress to recognize that dealing with the debt ceiling is their constitutional responsibility. This is an easy one. This is something that should be happening without conditions,” Press Secretary Karine Jean-Pierre said.
Yellen told Congress that the “extraordinary measures” she’s taking to pay the government’s bills include pausing investments in the retirement and disability funds for civil servants and postal workers. She warned though that this is a temporary solution and may only last until June.
“The period of time that extraordinary measures may last is subject to considerable uncertainty, including the challenges of forecasting the payments and receipts of the U.S. Government months into the future,” Yellen wrote. “I respectfully urge Congress to act promptly to protect the full faith and credit of the United States.”
Straight Arrow News Political Correspondent Ray Bogan spoke with Mark Hamrick, a senior economic analyst for Bankrate.com, about what happens next.
Bogan: Congress has yet to start negotiations. Should there be more urgency to make a deal?
Hamrick: Well, the debt ceiling array is a more than century old tool which has been proven to be highly ineffective, otherwise, it would not have been raised time and time again, and we wouldn’t have the level of debt that we have in this country. It is not effective in draining spending and it will likely be violated. Once again, the question of whether there should be urgency, I think there’s a legitimate question whether the debt ceiling should exist at all. And that’s a completely different question, as to whether elected officials in Washington should engage in a higher level of wise management of taxpayer money. That’s a completely different question, because we’re talking about making good on what has already been committed to in terms of spending. So, you know, elected officials in Washington get around to things and typically at times of their own choosing, but playing around with debt ceiling, playing around with the risk of a potential default, is absolutely inappropriate and counterproductive.
Bogan: Republicans say it’s time to balance the budget, and they want spending decreases with a debt increase. The White House says this is nonnegotiable because it’s a constitutional mandate that America pay its bills. Is it possible to solve both of these problems now? Or is one going to have to wait?
Hamrick: Well, you know, this will be the question to be answered in the coming days, weeks and months, and one way or the other, it needs to be resolved. Because the alternative, and unprecedented default is unacceptable. And it’ll be disastrous for the economy, and everyday Americans, how they go about it. I could even envision the possibility where a group of Republicans agree with a group of Democrats to try to resolve this, because as we saw in the repeated votes for speaker of the House, there was essentially a small group of Republicans that are standing in the way of getting the eventual speaker elected. And so I don’t know what that eventual solution is going to look like, but it needs to be addressed.
Bogan: What are the Treasury’s options if Congress doesn’t get this done? Some of the most talked about proposals include minting a $1 trillion platinum coin, high coupon bonds, invoking the 14th Amendment and payment prioritization by the Treasury, which is very similar what they’re already doing. Do any of those sound feasible?
Hamrick: Well, none of them are good options, and many of them are either not options at all or, or unreasonable. The reality is that the nation needs to make good on its obligations. The government runs out of cash and cannot pay them and the way that that would be resolved, of course is to raise the debt ceiling. Whether that could be part of a package or at least coinciding with package, potential spending cuts, we’ll see. Let’s remember that we have Republicans controlling the House and Democrats controlling the Senate and the White House. And it doesn’t seem as if sort of a global solutions on the lines of what some of the more optimistic Republicans are talking about is likely with the White House saying, for example, that essentially, the question is not broadly negotiable.
Bogan: I want to return to a point you made earlier, and that’s that every time the U.S. approaches its debt limit, there’s a debate about whether or not there should be a limit in the first place. Proponents of that say the government should be able to borrow whatever it needs. What would it take for that to happen? How would that change the dynamic of of yearly budget negotiations on Capitol Hill?
Hamrick: Well, the budget process for the most part in recent years has been broken. We’ve not had what would have been the dominant way of doing things for for the majority of our history, or at least modern history where one would have hearings on on such issues and and have, you know, so-called regular order on Capitol Hill where there’s a deliberate and potentially even thoughtful process associated with how you spend money and how you authorize those expenditures. So, you know, we’ll see how all this works going forward. But right now, the process is quite broken. In the sense of getting rid of the debt ceiling, that would be an act of Congress and a president would sign that legislation much the same as any other legislation. I looked at ceiling as the medical equivalent of have having bloodlettings and leeches applied to patients when common sense would dictate those were not good solutions. This solution in the sense of being, you know, a way of resolving a lack of fiscal prudence on the part of elected officials has been demonstrated time and time again to not be effective.
