The right-wing media push for a debt ceiling crisis is underway
Prominent right-wing media figures are encouraging House Republicans to use the debt ceiling as leverage to extract their political aims from a Democratic White House and Senate. Their hostage-taking approach courts an economic catastrophe and the unraveling of the constitutional order.
Fox News prime-time host and Republican propagandist Sean Hannity used a Tuesday night interview with Speaker Kevin McCarthy (R-CA) from the U.S. Capitol to urge him to ignore critics and play “a game of chicken” when the debt limit approaches later this year, without specifying what Republicans should demand as their price for raising it.
Hannity’s upmarket counterpart Hugh Hewitt, the Salem Radio host and Washington Post columnist, tweeted on Wednesday morning that House Republicans should “adopt the summary line: ‘We won't raise the debt limit until we close the border.’”
An hour later, he promoted National Review writer Jim Geraghty’s suggestion that they instead demand “repeal of the authorization of 87,000 new IRS personnel.” (Republicans and right-wing media oppose IRS funding included in the Inflation Reduction Act that would increase revenue by targeting wealthy tax cheats.) Hewitt added: “That may even be better than border security. Both building the wall and repealing the 87,000 are key priorities. Pick one.”
It’s not a great sign that right-wing media decided to take a hostage before settling on their demands.
Congress passes laws that dictate how the federal government raises and spends money. Since the revenues brought in by those laws are insufficient to cover the outlays, the U.S. Treasury funds the deficit by selling debt. Congress created the debt ceiling through a 1917 law, setting a statutory limit on the total debt the government can accrue. Some have argued that the law is unconstitutional because the government can’t run up debts and then refuse to pay them. But the question has largely been moot since Congress has regularly raised or suspended that limit ever since, most recently in December 2021, when it was set to “just under $31.4 trillion”; a figure that will be reached some time in 2023.
The debt ceiling has at times been a focus of intense political debate. Congressional Republicans used the threat of a debt ceiling breach during President Barack Obama’s tenure to push for deficit reduction. That tactic faded from use under President Donald Trump, who was happy to run up large federal deficits. But with a Democrat back in the White House, Republicans divulged in late 2022 that they would use debt limit brinkmanship to force big cuts to social safety net spending if they took back the House in the midterm elections. And after they won a narrow majority, the party’s right flank reportedly demanded that McCarthy pledge “to not raise the debt limit without major cuts — including efforts to reduce spending on so-called mandatory programs, which include Social Security and Medicare,” as their price for supporting his speaker bid.
The results of a debt ceiling breach would be calamitous.
“Once the government hits the debt ceiling and exhausts all available extraordinary measures, it is no longer allowed to issue debt and soon after will run out of cash-on-hand,” the Committee for a Responsible Federal Budget reports. “At that point, given annual deficits, incoming receipts would be insufficient to pay millions of daily obligations as they come due. Therefore, the federal government would have to at least temporarily default on many of its obligations, from Social Security payments and salaries for federal civilian employees and the military to veterans’ benefits and utility bills, among others.”
Hannity, in his comments to McCarthy, suggested that the impact would be negligible, but seems to be conflating a debt limit crisis with the sort of partial government shutdown that occurred most recently during the Trump administration. As CRFB notes, “many more parties are not paid in a default. … While a government shutdown would be disruptive, a government default could be disastrous.”
How disastrous? “An actual default would roil global financial markets and create chaos, since both domestic and international markets depend on the relative economic and political stability of U.S. debt instruments and the U.S. economy,” according to CRFB. “A Moody’s Analytics report released in September 2021 estimated that a default could have similar macroeconomic consequences to the Great Recession: a 4 percent Gross Domestic Product (GDP) decline, nearly 6 million lost jobs, and an unemployment rate of 9 percent. In addition, Moody’s predicted a $15 trillion loss in household wealth, with stocks dropping by as much as one-third at the depths of the selloff.”
There are options available to avert such a disaster. The White House and House and Senate leaders could agree on some sort of deal that provides Republicans with a fig leaf. If the House GOP leadership remains intransigent, some of its members could sign onto a dispatch petition putting a clean debt limit increase on the floor. The Biden administration could also act unilaterally by using its authority to mint a $1 trillion platinum coin so the government can pay its expenses; or adopt Matt Yglesias’ plan of “swapping out old bonds with high face values and low interest rates for equivalent-yielding bonds with low face values and high interest rates”; or say that the debt limit is unconstitutional and that Biden will violate it rather than violating all the other laws that require him to spend money.
But Republican extremists and their right-wing media supporters are unlikely to take any of those options lying down. They want chaos and massive, unpopular spending cuts, and are already signaling that they will fight to get them.
And that means we may be looking at two years of a very chaotic Congress.