America Held Hostage

As traditionally happens in this century, a Republican controlled House of Representatives is holding the nation’s debt ceiling hostage to get concessions from a Democrat president. So far, despite the cliff hanging last minute resolutions of the past, the U.S. has never defaulted on its debts. This time it feels different. I’ll explain why below.

As I have written in this space before, it is important to remember that the debt limit is based on commitments already made by the U.S. government based on the budget and appropriations authorized by past Congresses. It is not about new spending. It is about paying for past commitments, much like using a credit card to pay for a new suit and then later having to pay the credit company for the clothes you are already wearing. The laws creating the debt ceiling can be traced to the U.S. entry into World War I and were designed to make it easier for the government to expend funds in time of war. Since 1960 the debt ceiling has been raised 78 separate times, 49 times under Republican presidents and 29 times under Democratic presidents. Indeed, it may surprise you to know that the debt ceiling was raised three times under the last administration with no muss, no fuss and in a bipartisan vote.

Why the debt ceiling is important can be complicated. Likewise, so is the impact of failing to raise it this time. In part, no one knows exactly what will happen because the U.S. has never defaulted on its obligations to pay creditors. However, most economists and financial experts believe that a default, perhaps even the threat of a default as we inch closer to the deadline, could have catastrophic consequences for the U.S. economy and to the world economy. As Catherine Rampell succinctly outlines it in an opinion piece in the Washington Post, based on interviews with leading experts on the subject, the result would be a “financial Armageddon.” Briefly, much of our and the world’s investments and financial institutions are based on the ironclad belief in U.S. Treasury bonds. The U.S. has always made good on the interest and principal payments for those bonds. They are the bedrock of the financial system because they have always been considered risk free. If U.S. bonds are deemed unreliable and they are down graded, it has a cascading effect on other assets. As a result, interest rates would rise across the board, the stock market would plummet, companies holding bonds that count on bond interest payments for revenue and investments could collapse, investors accepting bonds as collateral could call in the money owed, which without the bonds and their interest, could cause borrowers to go bankrupt and if all of that happens at the same time, the system simply would collapse.

Kind of a big deal. That summary also does not mention that Social Security, Medicare, Medicaid, military salaries, government workers salaries, etc. etc. would not be paid. Some believe that “selective” payments of certain bills over others could mitigate the impact of a full default but no one in government is sure how that would work, who decides and whether it is even legal under current laws.

That is why the MAGA Republicans are holding the debt ceiling hostage. The consequences are considered to be so dire, that surely the president must concede to their draconian demands in order to save the world. Bwaaaahahahaaa.

In theory, we have already broken through the ceiling. In practice, through the use of “special measures” Secretary of the Treasury Janet Yellen has been able to keep paying the bills. She now says that come 1 June, the special measures will no longer be able to meet the payments required.

The Republican controlled House did pass a debt ceiling increase in a bill last week. Many of the Republicans that voted for it expressed their opinion that it would never make it into law but rather that it was just a starting point for negotiations with the president. In fact, President Biden is scheduled to meet with the leaders of both parties in the House and Senate to discuss the issue tomorrow. The problem is that President Biden says he will not negotiate with terrorists. Well, I said that. He said he would not negotiate over the debt ceiling but was happy to do so for the budget and appropriations. The Speaker of the House refuses to separate the issues. Probably, because the House bill passed last week is so extreme, he knows it will not pass on its own and thus he must hold the debt ceiling hostage in order to squeeze out concessions.

Please note that President Biden put forth his budget over a month ago and the Republicans have yet to present their version of the budget, only the vague provisions in their debt ceiling bill. (A quick primer on U.S. government. The budget is the desired spending requirements and where, the Appropriations process is where the actual allocation of funds occurs and the Authorization committee allows for funds to be spent. The bills usually go through a lengthy committee process that involves detailed negotiations. That is the “regular order” that the president would like to see happen rather than the high stakes game playing out now.)

Here are some of the highlights of the bill pushed through by the MAGA Republicans in the House. The actual bill is hundreds of pages long, but here are areas that have drawn the most attention. The debt ceiling will only be extended until March of 2024. Thus if the president accedes to all of their demands, we will be in the same situation in less than a year anyway and an election year at that. They demand a 22% cut in all “non-defense discretionary spending.” They also say Social Security and Medicare are off the table. As Dana Milbank explains, that means that the areas cut will, among others, include the FBI, border security, airport security, highway construction, veterans health benefits, food stamps, national parks and a whole lot more. If they decide not to cut 22% from some programs (remember that they have not said where the cuts will come from, only that they are required), then the cuts will be more than 22% in some areas. Should this become law, it will have a devastating impact on our economy. Economists warn that the provisions of the current bill would greatly increase unemployment, significantly slow economic growth and raise the probability of a recession in the coming months.

Why would the MAGA Republicans want to do that? Two things come to mind. One, is if the economy is significantly disrupted, it increases Republican chances to retake the White House and the Congress in 2024. That’s the most charitable scenario. The second reason for playing with the economy is much more nefarious in my mind.

By definition, MAGA Republicans are ardent supporters of Trump, Trumpism and the insurrectionists on 6 January. Trump tried to overthrow the government in order to keep himself in the presidency. There is no question about that. Fake electors. Attacks on voting machine companies. Pleas to find phantom voters — “I just want 11,780 votes.” Fomenting violence against the Congress to preclude a fair and peaceful transition of power. It is all there. They are domestic terrorists. Too strong a statement? I think not. What else would we call people that supported overthrowing the duly elected government of the United States? If they supported Osama Bin Laden they would be called terrorists. He didn’t fly the planes into New York and Washington DC. Yet, clearly he was a terrorist. How is it different in this case? I cannot believe that anyone in these united states would support Trump for anything other than a long prison term. I cannot think of one good policy or decision that he made. But even if you named twenty wonderful things that he did, sorry, game over. He tried to foment a coup to overthrow the government. End of discussion. It did not work but I think he and his supporters will try again. Yet increasingly, Trump’s actions are being normalized. He has an upcoming one hour “town hall” on CNN. That is normalizing his actions and legitimizing his candidacy. To date, no other candidates have a one hour town hall scheduled. Why give him his infomercial to spread lies?

What does all of this have to do with the debt ceiling? My point is that there are MAGA Republicans willing to do anything to get rid of President Biden and bring in Trump (or some other autocrat wannabe like him). If that means tanking the world economy and throwing everything into chaos, then so be it. Terrorists use every means available to gain their desired end state.

I have absolutely no doubt that there are members of the House that would be perfectly happy to see the U.S. default on its debt. Just the price of doing business to create the conditions for an autocrat to assume power.

There are ways to stop the madness. I am not sure that there are any Republican “moderates” left in the House that could be counted upon to do the right thing. They all voted for the current mess of a bill that we have now. Yet, the Speaker only has a four vote majority. There may be five or ten Republicans willing to break ranks and join the Democrats to pass a reasonable debt ceiling bill. There are at least 18 House districts where Republicans won, but President Biden won the presidential vote handily. The Democrats already have a bill in committee that could be used to create a “discharge petition” that under certain rules, could bring a bill to the floor despite the Speaker’s objections. It requires the signed support of the majority of the House, which while a long shot, has a chance. Unfortunately, the window between proceeding with collecting the signatures and the date of default is very narrow.

Another option may be the 14th Amendment which reads in part, “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” The original intent of this portion of the amendment was a reaction to Civil War debts, and it has never been used in modern times. Some legal experts believe that it gives the president authority to exceed the debt limit on his own, but should it be invoked, it will surely end up before the courts and that process could lead to a long period of uncertainty which would be nearly as disastrous to the economy.

What is certain is that no one knows exactly how this will be resolved. Current proposals include a few months extension for more negotiations, but personally, I do not see how the situation will change by then. The simplest answer is to raise the debt ceiling with a “clean” bill (no amendments or poison pills attached) and then do as the government should do — negotiate separate budget and appropriations bills.

But then when was the last time that things unfolded as they should?

Still No Pesos

Throughout his campaign and then during his reelection rallies as president, Mr. Donald J. Trump continually declared that he would build a wall along the border with Mexico and that Mexico would pay for it.  Time after time this was his go-to rally cry to fire up his base.

There is only one problem. Mexico supplied exactly zero pesos to build his wall.

Signaling that his wall promise was a scam, in January, 2017 Mr. Trump signed Executive Order 13767 that directed the federal government to begin building the wall using U.S. government funds.  No construction began because the funding was not there and it was unclear where funds for a wall existed.

Please remember that the Republican Party controlled the White House and both houses of Congress for two years, including 2017.  No funds were appropriated because the majority of those in Congress, including Republicans, realized that the wall was a terrible waste of money.

Also recall that in a compromise move, the Democrats in Congress offered Mr. Trump over 20 billion dollars for his wall in exchange for permanent legal status for the “Dreamers” (those under DACA, the Deferred Action For Childhood Arrivals order).  Mr. Trump was for it before he was against it.  He walked away without a deal.

Switching tactics, Mr. Trump shut down the government for 35 days at the end of 2018 and into 2019, the longest in American history, holding the country hostage to get funding for his wall.  Congress held firm.  Still no wall.

Trying yet again, in February, 2019 Mr. Trump declared a National Emergency using a loophole in an act passed during the Cold War intended to be used in a fast breaking real time emergency.  He tried to use that as the vehicle to move funds to build his wall that had not been appropriated for that purpose.  That move was blocked by a bipartisan vote in both houses of Congress.  Mr. Trump vetoed that bill and Congress did not override his veto.

Efforts in the courts effectively blocked construction by precluding any use of appropriated funds not intended for the wall. In July of this year, on a 5-4 vote, the Supreme Court allowed the use of 2.5 billion dollars in funds on the border while legal proceedings continue.

Many Constitutional experts assert that Mr. Trump’s use of these funds for a wall violates the spirit and letter of the Constitution which clearly gives the power over financial expenditures to the Congress.  Article 1, Section 9, Clause 7 of the Constitution says “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.”  In 2019 Congress specifically forbade the use of federal money for the wall.

To date, no new wall, fence or other barrier exists.  There have been upgrades to existing fences and barriers that needed repairs.

Yesterday the Trump Administration revealed that the Department of Defense (DOD) would divert 3.6 billion dollars from DOD construction projects to be used on the wall.  These were not nice-to-have items.  Many of the projects were needed to repair or replace infrastructure damaged by natural disasters.  Among them are:

  • 400 million dollars for rebuilding military structures in Puerto Rico and the U.S. Virgin Islands as part of the recovery from damage following Hurricane Maria.
  • 17 million dollars for Tyndall Air Force Base in Florida to rebuild following severe damage from Hurricane Michael.
  • 770 million dollars intended to help our NATO allies by building facilities for U.S. forces to operate in response to expanded Russian adventurism in Europe.  Specifically, the European Deterrence Initiative is a response to Russia’s invasion of Ukraine and annexation of Crimea.  I would bet Mr. Vladimir Putin is glad to hear of this change.
  • Several projects to rebuild substandard schools on military bases.
  • And on and on for bases in Utah, North Carolina, Arizona, Kentucky, Virginia, Maryland, Hawaii, Alaska and other states.

In addition, the Trump Administration is re-allocating nearly 300 million dollars from the Federal Emergency Management Agency (FEMA), the Transportation Security Administration (TSA), and the U.S. Coast Guard even as Hurricane Dorian bears down on the mainland.

Besides being a dangerous precedent for future presidents who are thwarted by Congress and declare a National Emergency to get their funding anyway, it is also bad policy.

These construction projects that are now “deferred” run the danger of never being built.  The Trump Administration says that future appropriations bills will pick up the funding for these needed repairs and new construction.  The Democrats in Congress and some Republicans, although they mostly remain as the silent majority, argue that they will never appropriate funds for those projects because they don’t have to — they already did it and cannot appropriate funds that they already appropriated. (And you thought Alice in Wonderland had some strange characters.)

What makes this entire bizarre episode so sad is that there is only one reason that this is happening.  Mr. Trump fears the voters in 2020 that he promised in 2016 would get a wall.  As his signature promise, if he fails to deliver, he will be shown to be as weak and unable to govern as he actually is.  This diversion of funds is a perverted use of presidential power to further the ambitions of a single person for his own gain.

It is probably only the beginning of the bizarre and Constitutionally dubious actions this president is likely to take to further his own personal goals as the election gets closer.  Mr. Trump does not have the best interests of the country as his guiding light.  He only cares about himself.