What if Trump is the President Who Faces a Debt Ceiling Trilemma?
One day down, only 1,460 to go! (Yes, that's correct. 2028 is a leap year.) I'll have lots to say about the firehose of new awful coming from the second Trump administration, but today, I'll revisit some old awful (the debt ceiling), while tomorrow, I'll examine one of President Biden's last moves (on the Equal Rights Amendment). So if you're hungering for my take on birthright citizenship, the Posse Comitatus Act, the limits of prosecutorial discretion as a means of stopping the TikTok ban, etc., sit tight.
On January 2, the government hit the debt ceiling, but not really, because of some quirks in the nation's accounts receivable and payable. But that delay was only good for a few weeks. Even so, we haven't yet hit the "real" debt ceiling, because a few days ago Treasury began to undertake the "extraordinary measures" that have, by now, become not at all extraordinary. Delaying payments to some internal government accounts enables the forestalling of economic doomsday for a few months.
In a moment, I'll come to my main point, but first I want to acknowledge that there's an argument to be made that we're actually nowhere close to hitting the debt ceiling. As Professor Buchanan and I have noted on many occasions in our prior writing on the debt ceiling, the statute defines total government debt by reference to the face amount of debt, which includes trillions of dollars of bonds held by the Federal Reserve. Professor Brian Galle has argued that the statute ought to be read to exclude the Fed-held debt. Professor Buchanan and I have described this as a plausible reading that could be invoked to avoid disaster, even if it is not the most natural reading of the statute. In any event, for now, at least, everyone is assuming that the traditional reading of the statutory definition--including Fed-held debt--will hold.
And that brings me to the main issue. As readers will recall, then-President-elect Trump scuttled a spending bill to keep the government open during the recent lame-duck session in part because it did not increase the debt ceiling. As I explained last month, it made superficial political sense for Trump to want the debt ceiling raised or suspended on Biden's watch, not his, but given that Trump doesn't pay any political price for gross hypocrisy, it wasn't in any sense vital to Trump that the debt ceiling be raised in December. And thus, soon enough, Trump gave his blessing to a different spending bill that also didn't include a debt ceiling increase. As a result, the debt ceiling will need to be increased, suspended, or repealed some time relatively early in the second Trump administration.
Will that be a problem? If I had been asked that question during the first Trump administration, I'd have said no. Without a whole lot of fanfare, Trump signed bills suspending the debt ceiling in 2017, 2018, and 2019. And seemingly with good reason. Over the last decade-plus, Republicans in Congress have used the debt ceiling as leverage against Democratic Presidents but not Republican ones. They understand that failure to raise the debt ceiling could lead to economic catastrophe and assume that a Democratic President will blink in their game of chicken--but they have no reason to hold out against one of their own, especially Trump, who can mobilize his brownshirts against them.
And yet . . . . When Republicans first tried to use the debt-ceiling as leverage, many of them said that they wouldn't raise or suspend it without budget cuts. As Professor Buchanan and I pointed out then and many times since, this linkage was arbitrary, because the debt ceiling must be raised to pay for bills coming due, but a combination of laziness and economic illiteracy on the part of the American media and the public gave the linkage some semblance of sense. Even so, it seemed that the Republicans playing chicken knew that they were playing chicken--that they simply assumed that Democrats in Congress and a Democratic President would swerve first. Things seem different now. Now it seems that they actually want to crash the car because they think their seatbelts or airbags will save them, or they think that crashing will be salutary.
During the Obama and first Trump administrations, one could already find Republicans like Mo Brooks or Chip Roy saying that defaulting wouldn't be so bad, but my sense from the response of the Freedom Caucus posture in December is that this view is now more widely held on the far right. I strongly suspect that it's still a minority view within the Republican caucus, but given the slim margin, even a handful of debt-ceiling never-increasers could prevent a bill raising the debt ceiling from getting through the House without some Democratic votes.
And that raises an intriguing question: Will Democrats use the debt ceiling as leverage? If the question is whether they'll try to get what they want attached to a clean debt ceiling bill, I think the answer is no. However, if a bill raising the debt ceiling is tied to Republican priorities that are toxic to Democrats, I could see the Democrats voting no. At that point, if even a few of the far-right Republicans also vote no--perhaps based on the bonkers view (but one that some of them actually hold) that default would not be very harmful or, as Rand Paul said in 2013, it doesn't count as default if the government pays interest on bonds. With this sort of view now having taken hold in the Freedom Caucus, I can imagine a congressional stalemate in which the debt ceiling is not raised or suspended on time. I don't think that's likely, but I think it is sufficiently possible to lead me to wonder what would happen then.
The question of what should happen then answers itself. All along, Professor Buchanan and I have argued that the reason the president should violate the debt ceiling rather than unilaterally decide not to spend some of the money Congress has authorized is that violating the debt ceiling involves the least usurpation of Congressional authority. That was important to us as a matter of principle even when the president we imagined facing a debt-ceiling impasse was Barack Obama or Joe Biden. It's even more important if the president is Trump.
Even apart from a debt-ceiling crisis, Trump's team are considering impoundment--i.e., declining to spend appropriated money. They haven't released enough details for observers like me to figure out whether their plans violate the Impoundment Control Act, but the fact that this is on the Trump agenda tells you all you need to know about how Trump would likely exploit a debt ceiling crisis if his ostensible allies in Congress force one on him. Trump would likely choose the most unconstitutional option, the one that maximizes his usurpation of congressional power, which he would then use to pursue his cruel and stupid policy agenda.
My normative bottom line hasn't changed at all: Congress should raise, suspend, or ideally, repeal the debt ceiling; if it doesn't, the president should borrow in violation of it. What has changed is my prediction. I was never all that confident in Congress acting sensibly or in the president making the right choice if it didn't. I'm still less confident now.