Will the US default on its debt?

By the time the Democrats have solid majorities again, that may only get them a few months.

I was about to say much the same thing. Mitch (and frankly Pelosi as well) isn’t playing chess – thoughtful checkers, maybe. McConnel’s greatest strength as Majority Leader isn’t his strategic acumen or political insight, it’s that he does not give one rip what anyone besides his caucus members think of him, and he will do anything it takes to protect them and add to their ranks. He is absolutely immune to being shamed or cajoled based on public opinion, the opinion of non-Senate-Republican peers, or how he will be judged by history or the hereafter. He has no problem at all being the asshole, even allowing his “moderate” members to criticize him when it helps them politically (knowing that they’ll still back him for Majority Leader). He is in no way bound by precedent, decorum, or his own previous words. He doesn’t feel pity, or remorse, or fear. He is the Republican Terminator.

Agreed, and this is also true of his relationship with Trump. McConnell has more than once sustained withering criticism from what is arguably the party’s strongest figure. He survived Trump’s shelling in 2017 and he’s still dealing with the fallout from January 6. And he still maintains a strong hand, precisely because he ignores the drama. Trump once said he was ‘as mean as a snake’, and he was right. McConnell just slithers in the grass like the snake that he is, and that’s why he survives despite brushing off attacks on multiple fronts.

I didn’t fully flesh it out, but a core reason I think McConnell is overrated as a leader is because he does not really lead, he follows. Newt actually shifted the course of the Republican party, arguably in a way that has made the party worse and the country more dysfunctional, but it’s hard to deny Gingrich changed the course of the party, Congress and the country. McConnell has not really done any of that, he has just ridden on a raft that moves with the waves of his faction. Arguably it shows spinelessness and poor party leadership. There’s, IMO, two theories (broadly) about the GOP. One is that it has to moderate, find a way to appeal to racial minorities, shift on climate change (because it is a #1 issue for many under-40 voters) and sell small-c conservatism to future generations. That was largely the prognosis of the “autopsy” following Romney’s 2012 loss.

The other vision is double down on everything and become a fascist white grievance party. It is quite clear the die is firmly cast, and the party has chosen its path. The problem is its current path long run is only viable if you actually can permanently undermine and even destroy democratic government in the United States, because it is an increasingly minoritarian position (and not just in blue states, the GOP is weaker than it has ever been with under-40s in basically every state in the union.) Now the more pessimistic out there see the January 6th riot, Trump’s attempt to overturn the 2020 election, voter restriction laws and other shenanigans as grim tidings that this is exactly what will happen, the GOP will successfully gut democracy and never be accountable to voters. I tend to think more that that project is *much harder to pull off on the scale necessary to protect the party long term. And what happens when that project fails? You’re left with a party out of power, that in the minds of most Americans will be seen as a failed fascist party, that no longer has any core alternative ethos because it long since abandoned most policy positions for white grievance. I just don’t see where it goes from there.

I brought these points up a lot in my local GOP gatherings back in the early 2010s, and a lot of people at the county level agreed, but I think anyone running for office just decided they didn’t want to fight the wave. McConnell did too, and that’s likely while he’s still leader. But an actual effective Republican leader, and one with more interest in the future of his party, would be trying to find a way to steer the ship in a more sustainable direction. In short I think McConnell’s leadership has been all about putting short term power over long term foundations of the party, now maybe I’m wrong and the project to end democracy succeeds, in which case I guess Mitch was right. But if that project is not actually so easy to attain (as I suspect), I do not see a happy future for his party, and he’ll be one of a number of significant Republican leaders who could’ve at least tried to fight for something different, and chose the path of least resistance and cowardice instead.

Excellent post, Martin. I think we’re at the crossroads- the Republicans will either go down in history as a failed fascist party or they will rewrite history because they’ll be a successful fascist party. I do hope you’re right that the antidemocratic project being very difficult. I’m a bit more pessimistic and fear they will succeed.

Couldn’t they raise the debt limit to like $1027 and not have this drama every few years?

Brian

Can someone explain this situation to me like I’m 5, which the news articles I’m finding are not doing?

How does having a limit on the amount of debt the US government is able to take on (if I’m understanding the definition of “debt ceiling” correctly) cause it to default on its existing debt?

How does raising the amount of debt it’s able to take on enable it not to default on its existing debt?

How does minting a trillion dollar coin solve problems?

Well, you use the trillion dollars to pay off some of the debt. It will cause other problems, but perhaps they will be less catastrophic.

As to why a coin? It’s an interesting quirk in the law:

Trying to make it simple as I can. We issue new debt when old debt expires. Without the debt ceiling raised, we can’t issue the new debt

I find it helpful to think of a line of credit at the bank. You spend more than you make, so you keep borrowing against your line of credit. Eventually you hit the credit limit and can’t borrow more. So now you can’t pay your loan on time and you’re in deep shit.

To put it in personal finance terms (which is a very bad idea when it comes to national finance). The Government is like a home owner who has several hundred home equity loan on his house, but who is still constantly inundated with offers to refinance, since the banks know that he’s good for it. Currently they have over mortgaged their home with a hundred different home equity offers. All of these require payments for principal and interest on a regular basis, but the goverment doesn’t have any money on hand. Usually what they do is just fill out another home equity loan and use that to make the payments. However, each time he does that he pinky swears that, “This is the very last time that I’m going to do this.”

Now the next round of loan payments is due and he either has to decide to say “No the time after this time is the very last time I do this” or else he isn’t going to be able to make their current payment.

Worse, if he doesn’t make the mortgage then the banks may think that he’s not actually good for it, and be less willing to send him offers. That’s when things get really bad.

Because now even the guys who used to tell you not to worry about the check at lunch are starting to give you the stink-eye when you don’t pick up a check, and the local dealer won’t extend credit for weed anymore.

Then your lawn catches fire…

I don’t think this is quite right. The debt ceiling puts a cap on how much cumulative debt the Treasury can have outstanding. As a debt series matures, the Treasury could still pay off the principle by issuing new debt in the same amount (since there’d be no net increase in debt).

The problem is that our obligations (which includes servicing existing debt) exceed our revenues, so it’s not enough to just replace outstanding debt issues. And if we can’t issue additional debt, decisions have to be made about which obligations won’t be met.

The US runs a budget deficit each year, so it spends more than it takes in. It does this by issuing debt. The US has spending commitments, such as military equipment and payroll, medicare payments, social security payments, principal and interest coming due on previous debt issues, and those spending commitments are more than tax receipts (and tariffs, fines, etc.). So, the US government issues debt all the time to cover those spending commitments.

The existing debt (principal and interest) is coming due all the time, and the US doesn’t have enough money to pay for it (due to those spending commitments exceeding the amount of money it takes in). So, it can issue more debt to pay for the existing debt (and other commitments). If it doesn’t, it won’t have enough money to pay for principal and interest coming due and will default on its current debt.

McConnell finally blinked. For now. Next crisis in a few weeks. Then another blink. Rinse and repeat. Funny how only the Republicans play games with the debt limit.

Yep. The Dems need to call them on their bluff. Simply refuse to play along, and keep scheduling votes* right up to the last minute. Make the Republicans own their obstructionism, or quit their bullshit.

*And in every vote, they should add a trillion extra dollars to the Debt Ceiling. “You know you’re going to blink eventually, the only question is how high you’ll let us raise the ceiling before you do.”

ETA: now that I think about it, that last part is brilliant…“Republicans refused to act until they’d raised the debt ceiling by six quadrillion dollars! They’ve abandoned all their principles in favor of Big Spending Government!”

This is not true. Last night my secret girlfriend Erin Burnett showed a segment where (after a tease) she revealed it was Joe Biden who made a scathing remark about Bush’s spending and refused to increase the debt ceiling so the Republicans had to do it without a single Democratic vote.

I am not saying both sides are equally hypocritical, but let’s not pretend those who represent the left are completely innocent. We for certain hold the moral high ground at this point in history-- that is specifically why I left the GOP, but as much as I prefer the progressive agenda and the leaders of the progressive agenda, they are not perfect.

Meh. Sometimes individual Democrats try to score points by making a courageous stand against a Republican president raising the debt limit. But you never see a matter in serious doubt when a Republican is in the White House.

So the Republicans are the real heroes here. They came to the negotiation table and compromised in order to save this country from a horrible economic disaster. God bless the Republicans and God bless America!

At least that will be the narrative since the Democrats are incapable of spinning anything in their favor.

I think those of us on the left all know the Republicans HAD to do this because it is a mutual goal and a bridge way, way too far. The right will believe they are the heroes, the other two-hundred and nineteen people may be confused – think we should send them all a postcard to explain it?