President Joe Biden is exactly where he didn’t want to be at this stage of his presidency: sitting across the negotiating table from Republicans with the global economy being held hostage. The memory of the last time this circus played out a decade ago, and the regret over not raising the debt ceiling unilaterally while they could, have both put a bitter taste in many Democrats’ mouths. But Plan A — insist on a clean raising of the debt ceiling, period — collapsed once Speaker Kevin McCarthy actually managed to pass a bill through the GOP-led House.
Now the days keep slipping away before the United States finds itself utterly unable to pay its bills. Plan A may be off the table (for now), but there are several other backup plans currently in the works. Unfortunately, none of them are showing much promise as of Tuesday evening, leaving the odds that America defaults for the first time ever to slowly tick higher.
Plan B — Bipartisanship
Any solution to come out of Congress will involve agreement between House Republicans and Senate Democrats — and at least a few votes from the opposite parties in each chamber. But that’s far easier said than done. The GOP is bent on extracting concessions in exchange for raising the debt ceiling. Among the demands in the bill passed last month: cutting nonmilitary spending below current levels; adding new work requirements to Medicaid, food stamps and other benefits; making it easier for oil companies to get permits for drilling. Democrats’ suggestions of new ways to boost revenue are nonstarters, with Republicans insisting that the poor suffer while the rich pay not a penny more in taxes. McCarthy has also ruled out any cuts to the defense budget or Social Security and Medicare, leaving any impact on the debt and/or deficit negligible without massive cuts to every other part of the discretionary budget.
And through all these negotiations, McCarthy still has his right flank to deal with. While it's currently singing his praises, members of the House Freedom Caucus are insisting that the bill that the House passed is the least that they’ll support. Some are advocating for pressing for even greater concessions, like folding in a harsh border security bill that the House passed earlier this month. Democrats would never support that position, leaving the impasse as firm as ever.
Plan C — Mint the Coin
If Congress won’t lift the debt ceiling, Biden is caught between a rock and a hard place, legally speaking. Lawmakers have both told him to spend money and banned him from the borrowing necessary to finance that spending. There are a few (untested) ways for him to act unilaterally, including invoking the 14th Amendment and ordering the Treasury to sell new bonds anyway. There’s also the option of minting a couple of platinum coins with a value of a trillion dollars each and depositing them with the Federal Reserve. There’s also a proposal out there to have the administration sell “zero-principal bonds” — bonds that have no face value but would still pay out interest to owners — that could be used to finance congressionally mandated spending.
There are plenty of skeptics who believe that the courts would rule against any such novel move, but the idea of the Supreme Court overruling a decision that would prevent a default seems absurd on its face. If anything, the court would more likely punt if asked to weigh in, calling it a question for the political branches to answer. Unfortunately, while Biden has given some lip service to these options, and Senate Democrats have called for him to pull the trigger on the 14th Amendment plan, there’s been no real movement on either front from his administration.
Plan D - Discharge petition
House Democrats have been mostly relegated to the sidelines, but they’ve already moved to create a potential escape hatch if Republicans don’t want to deal and Biden doesn’t act unilaterally. A 45-page bill quietly introduced back in January could become a vehicle for the clean debt ceiling raise that Biden has been angling for all along. The idea is that through a process known as a “discharge petition,” Democrats can go around McCarthy and the GOP leadership to force a vote on the bill.
But Democrats would need to siphon off enough Republican votes to have their motion pass with a simple majority. House Minority Leader Hakeem Jeffries and Minority Whip Katherine Clark said on Monday evening that they plan to reach out to “a handful” of Republicans about signing on. But there’s no guarantee those votes emerge, especially when not even all Democrats have reportedly signed on yet.
Plan E — Emergency Cash
Treasury Secretary Janet Yellen and her department were recently savaged in a blog post from the progressive group Employ America for “having failed both in its political strategy” of advocating for a clean debt ceiling bill and “in developing the operational readiness to undertake lawful alternatives,” i.e., the options in Plan C. But there has been some action in the Biden administration ahead of the so-called X date — the day when the Treasury Department will have run out of financial tricks to stave off a default.
That date is still a bit of a moving target, with Yellen telling Congress that it could come “as soon as June 1.” The Washington Post reported on Tuesday that the Treasury had asked other federal agencies to look for “flexibility” in payments that are due in early June and to inform the department of any major outlays planned before June 8. There’s also hope that if there’s enough wiggle room to avoid missing a payment between now and June 15, the incoming surge of quarterly tax revenue would be able to push the “X date” back even further.
Plan F — Failure
With none of these five plans a sure thing, that brings us to Plan F for “failure” — no agreement is reached, Biden doesn’t act on his own and the U.S. misses payments on its debt. Initial failure doesn’t necessarily mean that no deal will ever come together. In 2008, the much-criticized Troubled Asset Relief Program — aka the bank bailout — initially failed on the House floor, sending the markets into a tailspin. Seeing the damage being done, the bill passed in another vote several days later, allowing the program to make it to President George W. Bush’s desk.
In theory the pain from Plan F (and the breakdowns of Plans B — E) might loop us back around to Plan A, where Republicans delay their demands until budget negotiations in order to save the U.S. economy. But it’s a tough sell, especially when McCarthy’s caucus would likely oust him as speaker, and the economic pain that would take place in the interim would leave millions of Americans in the lurch.
It’s also possible that there’s some other way out of this GOP-imposed mess that I’m not seeing right now. For now, though, it feels like it might be about the time to start really buckling down and preparing to accept that a default will happen. Whether that marks the beginning of a solution or the end of an era of American economic hegemony is still entirely up in the air.
