Biden should ignore the debt ceiling: Don't declare an X-date. Keep paying the bills. Don't default

I want to start today with a bit of history that sheds some light on what’s happening in Washington this week and what Biden should do about the debt-ceiling crisis created by Kevin McCarthy’s Republican House

- Robert Reich

 

On Oct. 22, 1985, Treasury Secretary James A. Baker III told congressional leaders that if Congress failed to raise the debt ceiling by the end of the month, the Reagan administration would pay the nation’s bills by taking back Treasury securities in which Social Security had invested.

I remember being stunned at the time. It was an extraordinary move. It meant Social Security would lose interest paid on its funds.

If Congress still didn’t raise the debt ceiling, Baker said the administration would borrow from the railroad retirement and military retirement trust funds.

And if the impasse continued, the administration would begin selling gold from the U.S. gold reserve even though “that could undercut confidence here and abroad based on the widespread belief that the gold reserve is the foundation of our financial system,” Baker said.

Baker’s point was that the Reagan administration would continue to find ways to pay the nation’s bills, come hell or high water.

An agreement was finally reached after the Reagan administration had begun raiding Social Security but before it took any other measures.

The Comptroller General of the United States later found Baker’s raid on Social Security technically illegal but concluded nonetheless that Baker “did not act unreasonably” under the circumstances.

I recount this history to give you some perspective on the current debt-ceiling crisis and what I believe should be Biden’s next move.

First, showdowns over the debt ceiling have been going on for a long time.