Debt ceiling showdowns aren’t new – but this time gonzo Republicans are ready to blow up the economy
O n 22 October 1985, the treasury secretary, James A Baker III, told congressional leaders that if Congress failed to raise the debt ceiling by the end of the month, the Reagan administration would pay the nation’s bills by taking back treasury securities in which social security had invested.
It was an extraordinary move. Under Baker’s plan, social security would lose interest on its funds.
If Congress still didn’t raise the debt ceiling, the administration would borrow from the railroad retirement and military retirement trust funds.
If the impasse continued, it would begin selling gold from the US gold reserve “even though that could undercut confidence here and abroad based on the widespread belief that the gold reserve is the foundation of our financial system”, said Baker.
An agreement was reached after the Reagan administration had begun raiding social security, but before it took any other measures.
The comptroller general of the United States later found Baker’s raid on social security technically illegal but concluded nonetheless that Baker “did not act unreasonably” under the circumstances.
I recount this history to give you some perspective on the current debt-ceiling crisis.
First, showdowns over the debt ceiling have been going on for a long time.
Second, they have often been fueled by soaring national debts due to Republican tax cuts for the wealthy and big corporations.
The 1985 standoff involved a refusal by Senate Democrats to support a balanced budget, even though it was Reagan’s mammoth spending on the military and huge tax cut that had doubled the national debt in less than five years.
Finally, they have required Treasury secretaries to do extraordinary things to keep paying the nation’s bills
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