4 ways around a debt ceiling crisis — and why they might not work
One defining feature of 21st century politics is that the nation keeps tip-toeing up to the edge of potential — and avoidable — economic ruin, in the form of threatening to default on its debt.
And it's happening again: Treasury Secretary Janet Yellen says the U.S. will reach the debt limit on Thursday, but can use what she calls "extraordinary measures" to push off default until this summer.
The standoffs in recent years have always been resolved in time, but given the recent turmoil in the House Republican Conference, economists and business leaders are once again nervous that lawmakers won't reach a deal.
That means lawmakers and pundits and the Twitterverse are once again discussing potential unorthodox solutions to the crisis — ranging from a little-used congressional procedure to unprecedented, legally questionable maneuvers, a few of which we consider below.
The upshot: none of these ideas are guaranteed to work, and some are exceedingly controversial, or even potentially not legal. But there's a reason they keep coming up every time we have a debt limit conversation: because defaulting could be extraordinarily, catastrophically bad, leading people to try to think up ways around it.
1. The discharge petition — a (clumsy, difficult-to-use) procedural tool
A discharge petition is a House procedure that essentially forces a bill out of committee and to a vote. If a bill — say, a measure to raise the debt ceiling — is sitting in committee, not going anywhere, 218 House members can sign onto a petition pushing the bill through for a vote, even if leadership hasn't scheduled a vote.
Reportedly, congressional Democrats and some Republicans have been discussing using this route to raise the debt limit.
But before any vote, there are several steps: the bill must be in committee for 30 legislative days, as the Congressional Research Service laid out in a detailed 2019 report on the discharge petition process. Note that that's 30 legislative days, not calendar days — as Democratic Rep. Brendan Boyle told C-SPAN last week, that could end up being two to three months.
After that, the bill gathers signatures. Once it gets 218, seven more legislative days must pass before debate and a vote can happen.
If you think that sounds onerous, you're absolutely right. As the CRS noted in that report, "Discharge is generally the only procedure by which Members can secure consideration of a measure without cooperation from the committee of referral, or the majority party leadership and the Committee on Rules. For this reason, discharge is designed to be difficult to accomplish and has infrequently been used with success."
2. Payment prioritization — avoiding default technically...but then what?
The Washington Post reported last weekend that House Republicans are preparing a plan instructing the Treasury to prioritize its payments. The Treasury takes in less money than it spends, so under such a plan, it would pay some bills but not others.
It's likely, the Post reported, that the government would pay bondholders first — that is, people who already loaned the government money would get payments owed to them. And therefore, the U.S. wouldn't default on its debt, and ideally, that would stave off the higher interest rates and plunging stock market (and all sorts of other knock-on effects) that a default might cause.
But still, there would be a few potential problems here. One is that some bills would not get paid on time — and the decision to stop spending on any given program could hurt any number of people, economically or otherwise. While the GOP plan would reportedly likely protect Social Security, Medicare and military spending, that leaves questions about which of a broad swath of other government programs (SNAP? Medicaid?) would or wouldn't be funded.
In addition, there is some question as to whether prioritization is even possible, given the Treasury's automated system for paying its bills — a question that was raised during the 2013 debt ceiling showdown.
Plus, even if prioritization technically allowed the government to avoid debt default, that doesn't mean the nation would avoid economic consequences. When the U.S. came close to defaulting in 2011, it sent stocks tumbling and led to a U.S. credit downgrade — long story short, that means higher borrowing costs, which can mean an economic slowdown.
And last but not least, such a plan would have to pass the Democratic-led Senate. That could be exceedingly unlikely.
3. #Mintingthecoin — a "gimmick" that may leave investors spooked
This idea has been around since the big debt ceiling fight in 2011 (and it appears to have born of a blog comment, per Dylan Matthews' in-depth explainer at Vox).
The #MintTheCoin plan leans on a decades-old law allowing the Treasury to mint commemorative platinum coins of any denomination. So while the intent was never anything to do with a debt ceiling, the idea is that the law nevertheless allows the government to literally print money — in this case, a coin worth, say, a trillion dollars. The Treasury would deposit the coin at the Fed, and that would mean money for the government to continue to pay its bills.
But as with prioritization, there are plenty of reasons this might not work.
First off, it's flat-out unlikely to happen: in 2021, both Yellen and the Biden White House rejected the idea, with Yellen dismissing it as a "gimmick."
Relatedly, Yellen noted then that the coin could damage the central bank's independence, by dragging it into a fiscal fight (and, relatedly, a political fight) — arenas where the Fed doesn't venture.
In addition, it's untested, legally and economically, and therefore might not avoid economic turmoil (more on that later).
4. Invoking the Constitution — legally questionable
This argument rests on Section 4 of the 14th Amendment, specifically, that it says: "The validity of the public debt of the United States ... shall not be questioned."
So the idea here is that the country simply has to keep paying on its debt obligations, because not to do so would be unconstitutional.
However, it's not clear whether that's true. The 14th Amendment solution has been raised over and over, and legal scholars have come to no agreement on whether it would allow the U.S. to ignore the debt ceiling.
Still, even if the 14th Amendment or the platinum coin could avoid debt default, that doesn't mean they'd stave off the economic problems that would come with default, explains Mark Zandi, chief economist at Moody's Analytics.
"So you own a 10-year bond — you wanna make sure you're getting paid in a timely way for 10 years," he said. "And you're watching this these machinations, gimmicks and legal challenges. And you're saying to yourself, 'There's a pretty good chance I'm not going to get paid at some point in the next 10 years. Therefore, you got to pay me more to take this risk or I'm just out of here.' "
For now, Biden and congressional Republicans say they aren't budging. In reality, there's only one surefire way to avoid a crisis — some form of bipartisan compromise — and several other maybe, who-knows, cross-your-fingers paths that miiiight work...or might simply lead to economic turmoil.