Two weeks after warning House Speaker John Boehner (R-Ohio) and other congressional leaders that the United States would crash through the debt ceiling on Nov. 5, Treasury Secretary Jack Lew sent another missive on Oct. 15 that moved up the drop-dead date to Nov. 3. Lew estimates that the United States would have $30 billion in cash on hand to pay the nation’s bills. With Boehner on the way out, no successor in waiting and all of Congress in recess until Monday, this is an outright crisis whose resolution might prove elusive.
As they did during the debt ceiling crises of 2011 and 2013, the good folks at the Bipartisan Policy Center (BPC) have released a detailed look at the horrible choices facing this nation if Congress doesn’t raise the legal borrowing limit. Now, they measure the impending misery not by the Nov. 3 drop-dead date, but by the date they estimate Treasury would have to rely solely on daily revenues to meet its obligations. That “X date,” as they call it, is somewhere between Nov. 10 and Nov. 19. And what they estimate could happen in the first two days is beyond anything Americans have ever had to contemplate.
By BPC’s estimate, if the “X date” is Nov. 10, Treasury would get $6.4 billion in revenue that day to pay $23.1 billion in bills. That includes $14 billion in Social Security payments. On Nov.12, there would be new obligations totaling $12.9 billion with just $6.2 billion in revenue to meet them. That amount would cover the $4.6 billion in Medicaid and Medicare expenses due that day.
In those two days alone, Treasury would pull in just $12.6 billion to pay for $36 billion in bills. The federal government would be $23 billion in arrears. “Treasury would be about $68 billion short of paying all bills owed between Nov. 10 and [Nov.] 30” according to BPC. “Approximately 31 percent of the [government’s bills] would go unpaid.”
Now, let me repeat this because folks mess this up all the time. Raising the debt ceiling is not giving President Obama a blank check. Nor does it increase spending. Boosting the legal limit on federal borrowing — now resting at $18.1 trillion –allows the federal government to pay for purchases already authorized by Congress. To not raise it, as Lew has said many times, is like running up your credit cards and then ignoring the bills that follow. A surefire way to ruin your credit.
Failure to raise the debt ceiling would unleash hell on the U.S. economy. It would force the president to pick winners and losers, to choose between paying military salaries and food stamps, Social Security benefits and interest payments to bondholders. And the inability of Treasury to pay back the principal and interest due on maturing securities totalling about $450 billion between Oct. 15 and Nov. 30 would unleash a hell on global financial markets that is hard to imagine. Prioritizing payments or invoking the 14th amendment to avoid default are not options.
“Because Treasury securities are usually safe and liquid, they are treated as a foundation of the global financial system,” Shai Akabas, associate director of economic policy at BPC told me. “If those features are called into question, we do not know how severe the implications would be for broader financial markets.” Here’s what we do know. Failure to raise the debt ceiling for the first time in our nation’s history would obliterate that perception and destroy the full faith and credit of the United States.
This is serious business that Congress will have just 10 working days to address. Meanwhile, Boehner is slated to leave Oct. 30. Even though he says he will stay until there is a successor, there is no timetable for when said person will be selected and elected by the House. Who that might be remains in flux as the “Paul Ryan is our savior” aura is now giving way to “Paul Ryan is not conservative enough” for the job.
And that turning on Ryan as not conservative enough is emblematic of the insanity roiling the Republican conference. When they took over the leadership of the House after the 2010 elections, the know-nothing majority promptly brought the nation to the brink of default in 2011. After the 2014 midterms, the GOP increased its majority to the largest since the elections of 1928, cost Boehner the speaker’s gavel and denied it to House Majority Leader Kevin McCarthy. This is the same crew that was willing to shut down the government over funding for Planned Parenthood.
To think they would raise the debt ceiling without drama or rancor, without risking the creditworthiness of the United States, is foolish. To think Boehner won’t succeed in actually getting it done before he leaves the Capitol and that his successor won’t either is truly frightening.
Follow Jonathan on Twitter: @Capehartj