The present-day Republican Party is like a big rowdy family who live next door and come out into the yard occasionally to point guns at your house. Usually, they don’t kill you. There may be an exception coming up, though: the ongoing battle over the federal debt ceiling, a statute that sets an upper limit on how much money the federal government can borrow to, among other things, repay the interest on the federal bonds that constitute most of the national debt.
For the third time in the past decade, the Republican Party is suggesting that it might not feel like going along with a debt ceiling increase.
This is not the same as threatening a government shutdown unless Congress passes a budget resolution. Government shutdowns are very, very bad for the economy and the world reputation of the United States. We know because we have had three in the 21st century; in each instance, it was because Republicans in Congress tried to hold a Democratic president hostage to their unreasonable demands.
But the U.S. has never defaulted on its national debt. That, sane economists agree, would be an economic catastrophe. It would tank the U.S. economy—and probably the world’s—overnight and deal a blow to American credit that would likely never be repaired.
But Republicans find it fun to think about. They are now, once again, threatening to tank the nation’s credit if they don’t get their way. In a letter to President Biden dated August 10, 2021, 47 of the 50 Republican senators announced flatly that “we will not vote to increase the debt ceiling, whether that increase comes through a stand-alone bill, a continuing resolution, or any other vehicle.” Their reasoning is that public debt is a “problem created by Democrat spending. Democrats will have to accept sole responsibility for facilitating it.”
The suggestion in the letter is that Biden, like a feckless teen, has spent all his money and now wants Congress to raise his allowance. That’s wrong on many levels. The threat of default targets, among other things, payment of interest on the national debt. That debt includes bonds issued years or even decades ago, to cover programs Congresses (both Republican and Democratic) have already authorized. The current level of national debt is caused by the imbalance between monies Congress has already spent and taxes it has already authorized. The government sells bonds to fund Congress’s programs, and pledges to pay the debt on time and to the penny. As Treasury Secretary Janet Yellen wrote in a letter to congressional leadership last month, “Increasing or suspending the debt limit does not increase government spending, nor does it authorize spending for future budget proposals; it simply allows Treasury to pay for previously enacted expenditures.”
The idea that this is “Democrat spending” is a bald-faced lie. The national debt ($28 trillion as of September 20) is the handiwork of both parties. It has nothing to do with projected spending in programs being proposed by the Biden administration. It represents money that was borrowed to pay for spending already authorized over the years—everything from the military to Social Security to the border wall to the food stamp program.
This partisan threat, however, takes us back to Civil War–era issues, because it violates the Fourteenth Amendment, ratified in 1868. Here’s why: After the collapse of the “Confederate States,” southern whites found themselves focusing on the national debt. They didn’t want to pay it.
Almost nonexistent at the time of “secession,” the debt had increased thirtyfold by the time of Appomattox. Most of this money was raised by the sale of government bonds to investors at home and abroad. It was used to build and maintain the weapons, railroads, iron mills, naval vessels, and armament factories that created the North’s mighty industrial and military machine—one that, after an uncertain start, had crushed the South’s ability to resist. Now the time had come to begin paying back those who had opened their coffers to save the Union.
The white South, however, didn’t want to be part of paying it back. “What, ruin us, and then make us pay the cost of our own whipping?” one white South Carolinian complained to Sidney Andrews of the Chicago Tribune. “I reckon not.”
In fact, white southerners figured that the Union owed them money—a lot of money. Yankee meddling, after all, had destroyed slaveholders’ “property” rights in their slaves—capital assets that, in the words of the Yale historian David Blight, amounted to “the largest single financial asset in the entire U.S. economy.” The divested slave owners wanted compensation for what they saw as an act of theft.
The South had hopes for aid from the Supreme Court. The Thirteenth Amendment did away with slavery, but said nothing about repayment to “owners.” Before the war, what Americans called “the Slave Power” had always found a friend in the Supreme Court; in Dred Scott, the Court—which had four slave-owning justices and one former slave owner as chief justice—had affirmed that due process protected human property as well as any other. By 1865, the Court had changed—Lincoln appointed four new justices and a new chief justice—but no one could be sure what their attitude toward emancipation as a financial matter would be.
There was one additional wrinkle: The South itself had borrowed millions to finance its unsuccessful war effort. They expected to take over Congress once they were restored to representation. After that, either the Union would pay off the Confederate state debts, or it would not be permitted to pay its own. “If that Confederate debt isn’t honestly due no debt in the world ever was,” one prominent Georgian told The New-York Tribune. “If we’ve got to repudiate that, we may as well help the Democrats repudiate the debt on the other side.” A Virginian assured John Richard Dennett of The Nation that the Union bonds “were going to be repudiated in less than twelve months.”
The antislavery forces that were then in control of Congress took note. The result is what today is an obscure provision of the Fourteenth Amendment, Section Four:
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. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.
The first sentence is written in stark terms: “The validity of the public debt of the United States, authorized by law . . . shall not be questioned.” (Emphasis added.) It’s a very different set of words than, say, “The public debt shall be paid” and far stricter than “We will pay the national debt when it serves our purposes.” It doesn’t even say “Congress shall pay the national debt.” The obligation it imposes is on the government as a whole—and the peremptory wording suggests a determination to keep debt repayment off the national political agenda.
Whatever the framers meant by it, that is good advice for a world in which the U.S. dollar is the world’s most important reserve currency—and the nation’s economy is kept afloat by selling bonds to foreign investors.
Whatever spending the federal government has done under the nine months of the Biden administration has made a small contribution—and the major reason for ballooning debt is the massive tax cut passed by the Republican Congress in 2017. When Donald Trump’s cut passed, there was no attempt by the Republican majority (they controlled both houses) to balance the cuts with cuts in spending. The whole thing was written on IOUs. When the IOUs come due, it is disingenuous to say that you don’t have to pay them back because someone else is planning to spend money on things you don’t like.
Neither Republicans nor Democrats, in law, borrowed the money; the United States did, pledging its “full faith and credit” that it would be repaid on time in full. Raising the debt ceiling just ensures that this will happen. And strangely enough, the Republicans understood that while Trump was president—the debt ceiling was “suspended” by statute in 2019. That suspension has just expired, and suddenly the GOP is singing a different tune.
Of course, the consequences of even a temporary default would be devastating. With the world economy teetering on a knife’s edge during a pandemic, a default would be financial suicide. Paying off after a month or two would not repair the damage; the U.S. would never recover its place in world finance. So . . . it probably won’t happen. Just the way the folks next door usually don’t shoot you. But that doesn’t make me feel better.
The current crisis, with one party using the debt for short-term gain, has eerie echoes of the constitutional struggles that gave rise to the Fourteenth Amendment. Take a good look at the Senate map for the 117th Congress. Now compare the red and blue areas with a map of the two sides in the Civil War. The old Confederacy is the heart of today’s red caucus; the old Union states are mostly blue or mixed. And the rhetoric about “Democrat spending” is a not-so-subtle reminder that Democrats favor social programs that help ordinary people; programs that, to some parts of the white imagination, give “their” money to “those” people—immigrants, women, people of color.
There are three ways out of this dangerous recurring drama. Here they are, in descending order of desirability.
First, Congress could simply do away with the debt limit. The statute didn’t exist until 1917 and was intended to facilitate borrowing for the war effort, not to paralyze the government from time to time. It has served whatever purpose it once did, and it’s time for it to go.
The second would be for Congress just to pass a statute raising the debt limit—nothing else attached—by a bipartisan vote. Preventing default should be a routine matter, without operatic drama or threats of destroying the world economy for short-term political gain.
The third way is one I have been discussing since 2011. It is the worst option I can think of, but it is still better than default. It would be a simple announcement from the president that, if Congress does not vote an increase, he will simply order payments to continue, in violation of the debt ceiling, until Congress does its job. That option would be justified by precisely the same kind of reasoning that conservatives make when they hold the White House. Since the time of Alexander Hamilton, the argument has been that the president has any power or function created by the Constitution unless the document gives exclusive power over that function to Congress. The Fourteenth Amendment establishes that government, as a whole, has both the power and the obligation to honor the national debt. If Congress won’t or can’t fulfill this obligation, the president arguably must.
At the dawn of the 2011 debt crisis, I found myself writing (and writing and writing and writing and writing) about this possibility. For 15 minutes, I was semi-famous as the double-dome with the crazy theory; the high point came when former Massachusetts Representative Barney Frank accused me of believing Elvis was still alive. Since then, though, a number of legal and policy heavyweights have seconded the idea that a president, under both the text of the amendment and the iron law of necessity, cannot allow Congress to wreck the world economy for partisan ends.
We will probably avoid disaster this time. But the advent of the debt ceiling crisis as a recurring feature of American governance poses a long-term threat to the nation’s financial well-being. Every threat to wreck the economy will be accompanied by talking heads explaining that it wouldn’t be that bad (see this explanation by Senator Richard Burr in 2013). Eventually, people who don’t believe in vaccines or vote totals will stop believing in the laws of finance as well.
The debt ceiling threat, then, will surely be used next time and the time after that until, like Chekhov’s pistol on the wall in Act One, it must eventually be fired come Act Three. And that shot may be the final act of the American tragedy.