Republicans want to destroy the economy above the debt ceiling. let her

Last Thursday, Treasury Secretary Janet Yellen announced that the federal government had reached the limit for total federal debt and called on the Treasury Department to take “extraordinary measures” to avoid defaulting on what would likely trigger a global financial crisis.

Congress could defuse this bombshell simply by raising the debt limit, as it has done dozens of times under presidents of both parties for decades. But the MAGA radicals, who now control the House of Representatives, refuse to raise the debt ceiling unless President Biden approves devastating cuts to Social Security, Medicare and other key programs.

I was involved in a similar debt ceiling battle 28 years ago, which provides some lessons for next steps. In November 1995, Republicans refused to raise the debt ceiling unless Bill Clinton approved a package of sweeping spending cuts, welfare overhauls, curbs on Medicare and Medicaid growth, and a balanced budget within seven years.

I and other Clinton advisers urged him not to negotiate. Even if the public didn’t understand that the debt ceiling had less to do with that of the nation future debt than with obligations that the United States had made in the pastwe couldn’t allow the Republicans to hold the economy hostage.

The full confidence and creditworthiness of the United States was at stake. It shouldn’t be negotiable.

Clinton agreed. “If they send me a budget that just says, ‘You take our cuts or we let the country default,’ I will object,” he said. He called the Republican tactics “economic blackmail,” which they were.

Then, when the Republican House passed a bill raising the debt ceiling through December and passed a rolling resolution calling for higher Medicare premiums and other spending cuts, Clinton vetoed both bills.

“America has never liked pressure tactics, and I would be wrong if I allowed these kinds of pressure tactics to dramatically change the course of American life,” he said. “I can’t and I won’t.”

What happened after that? The government has closed. The American public was furious — at the Republicans, who paid dearly in the subsequent midterm elections.

The budget standoff was resolved in early January 1996, but the debt ceiling problem remained. When Treasury Secretary Robert Rubin wrote to House Speaker Newt Gingrich that Congress had only until March 1 before the Treasury Department failed to meet its commitments, rating agency Moody’s announced that it was considering changing the rating for US – downgrade government bonds.

Republicans quickly gave up, offering to raise the debt ceiling in exchange for some modest measures.

So Lesson 1: Don’t negotiate the debt ceiling.

The 2011 debt ceiling battle was different. The Obama administration did negotiate with Republicans in the House of Representatives, leading to the Budget Control Act of 2011. And when the debt ceiling had to be raised again in 2013, Obama renegotiated. During this standoff, the government was partially closed. Here, too, the Republicans bore the main blame.

Lesson 2: If you must negotiate, make the GOP pay the political price.

In these struggles, some Republicans presented a fallback position: Instead of raising the debt ceiling, the federal government should prioritize what bills to pay, starting with interest payments to lenders in the United States (bund holders).

That way, they argued, there would be no technical failure.

The idea never went anywhere because such prioritization would cause the economy to falter and stock markets to plummet in the face of the sudden cessation of huge government spending.

But now the so-called “debt prioritization” is back. According to Washington PostIt was part of the secret deal Kevin McCarthy made with his critics to back him for speaker.

They agreed that Republicans will stand firm not to raise the debt ceiling and will pass legislation directing the Treasury Department to prioritize debt service payments. Everything else would be sacrificed, including critical federal spending like Medicaid, food safety inspections, border control and air traffic control. The US would be forced to stop paying up to 20 percent of promised spending.

This could be the most economically irresponsible backroom deal in Republican history. Even conservative economists are warning of a stock market spiral and significant job losses.

It is also the most politically stupid. In fact, it would put the interests of bondholders — including Chinese lenders to the United States — ahead of American welfare.

Lesson 3: If that’s what House Republicans really want, then (as George W. Bush might say) bring it on.

Robert Reich is Professor of Public Policy at the University of California, Berkeley and author of Saving Capitalism: For the Many, Not the Few, and The Common Good. His new book The System: Who Rigged It, How We Fix It is out now.

The views expressed in this article are the author’s own.