by Max Sawicky
First published May 2, 2023 in In These Times
Contrary to some expectations, Speaker of the House Kevin McCarthy (R-Calif.) has managed to unite his caucus around an austerity plan dubbed the “Limit, Save, Grow Act,” which is being used as ransom for not blowing up the economy with a debt default by the U.S. government. Democrats are charging that the plan would cut benefits to veterans and food stamp recipients, among others, while Republicans have issued outraged denials. So what’s really going on?
McCarthy is accusing President Biden of endangering the economy by refusing to negotiate on the debt ceiling. Of course, it would be easy for the ceiling to be lifted absent the obstruction by McCarthy himself. His is the “stop me before I kill again” strategy.
A failure to raise the debt ceiling is feared to impede the federal government’s ability to pay its bills, including interest due on bonds held in the private sector. Failure to pay interest due, on time, would represent a default — the global financial implications of which are unknown, and possibly catastrophic.
The debt ceiling is a legal fact, but it is directly contradicted by an alternative fact: the U.S. Constitution stipulates that the government must make good on its debts. So one suggested resolution of this conflict is for the Treasury to simply ignore the debt ceiling and go on about its routine operations.
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