- Another debt ceiling crisis is looming, and Republicans and Democrats aren’t negotiating.
- Instead, some Republicans have proposed prioritizing some payments over others to avert the crisis.
- Treasury Secretary Janet Yellen said that’s just default by another name.
Treasury Secretary Janet Yellen has become the Shakespeare of the debt ceiling crisis, proclaiming that Republicans’ proposed plan to selectively pay off some debts is just a default by a different name.
Since they took the House majority, Republican lawmakers have been using raising the debt ceiling, and keeping the US on top of paying its bills, as a bargaining chip to achieve spending cuts on Democratic priorities. But should they fail to raise the debt ceiling, the US will default on its debt — which would be catastrophic and unprecedented — and they have yet to put forth a concrete plan to avoid that result.
One idea Republicans have floated is debt prioritization, in which the government would prioritize certain obligations over others should the country default. As The Washington Post reported last week, Republicans have started preparing for default through legislation known as the Default Prevention Act, which would allow the government to continue borrowing money while ensuring benefits like Social Security don’t lapse.
Yellen is not on board with that idea.
“I think that we should not think that prioritization is a solution to the debt ceiling issue,” Yellen said at a Friday House Ways and Means committee meeting on the 2024 budget. “Prioritization is simply not paying all of the government’s bills when they come due. That is something we have never done since 1789. That really is just default by another name.”
This isn’t the first time Yellen has slammed GOP plans to address the debt ceiling. In January, she said that “a failure on the part of the United States to meet any obligation, whether it’s the debt holders, members of our military, or to Social Security recipients, is effectively a default.”
“What’s critical is that we maintain our commitment to pay the government’s bills — all the government’s bills — when they come due,” Yellen said on Friday. “And if we don’t do that and think that there is some shortcut around it that will avoid economic chaos, we’re kidding ourselves — because not paying the government’s bills will produce economic and financial collapse.”
The clock is ticking for Congress to raise the debt ceiling, with the US expected to run out of measures to keep the government funded as soon as July. While President Joe Biden has said he will not sit down with Speaker of the House Kevin McCarthy to discuss terms to raise the debt ceiling until Republicans unveil their own budget — Biden released his last week — conservative lawmakers have floated areas in which they would support cutting spending for a potential deal.
For example, the House Freedom Caucus on Friday unveiled its plan called “Shrink Washington, Grow America,” which would raise the debt ceiling only if Congress passed legislation to, among other things, end student-debt relief and rescind unspent COVID-19 funds.
The White House is less than impressed with that proposal, signaling further tension to come as both parties spar over how to ensure the US and world don’t devolve into an unprecedented financial crisis.
In Friday remarks, Biden said that there were some members of the House Freedom Caucus who would consider voting to raise the debt ceiling contingent upon their own cost-cutting legislation getting passed.
“You know what the essence of the enacting legislation is? Cut all spending other than defense by 25 percent. Twenty-five percent across the board,” Biden said. “Now, that means cops, firefighters. It means healthcare.”