Khanna: Biden may have to take unilateral action to prevent debt crisis
Rep. Ro Khanna (D-Calif.) suggested on Monday that President Biden may have to take unilateral action to prevent a crisis over the debt ceiling.
“I think we’re going to have a rocky time,” Khanna told Bloomberg News. “It’s not great for the political system, but at the end of the day I don’t think the United States is going to default.”
“The question is whether it’s going to come to unilateral action by the executive branch,” he said, adding, “I hope it doesn’t.”
The U.S. hit its debt ceiling on Thursday, prompting the Treasury Department to implement “extraordinary measures” to prevent the government from defaulting on its debt. These measures should give Congress until early June to address the debt ceiling, according to Treasury Secretary Janet Yellen.
However, House Republicans have sought to tie a debt ceiling increase to spending cuts — a nonstarter for congressional Democrats and the White House, who have called for a clean increase of the debt limit.
This potential showdown has led to growing concerns that the U.S. could default on its debt and trigger a global economic crisis.
In response, Khanna suggested several ways that the Biden administration could unilaterally take action on the issue. One method that the California Democrat proposed, minting the $1 trillion coin, has already been largely dismissed by Yellen.
“It truly is not by any means to be taken as a given that the [Federal Reserve] would do it, and I think especially with something that’s a gimmick,” Yellen told the Wall Street Journal on Sunday. “The Fed is not required to accept it, there’s no requirement on the part of the Fed. It’s up to them what to do.”
Khanna also floated the possibility that the Treasury could issue bonds with higher interest rates, essentially using an accounting trick to allow the U.S. to continue to pay its debts. However, this method could decrease confidence in the market, Bloomberg News noted.
Biden could also argue that the U.S. government ignore the debt ceiling in favor of respecting the spending that Congress has already approved, Khanna said.
A pair of law professors from Cornell University and the University of Florida have previously argued for this as the “least unconstitutional option,” claiming that Congress has given the president several mandates — to abide by its authorized spending, taxing and debt limit — that cannot all be complied with at once if the debt ceiling is reached, according to Vox.
Khanna also criticized House Republicans’ stance on the debt ceiling in his interview with Bloomberg News, pointing to the debt accrued under GOP leadership.
“We’re looking at paying the debt largely accrued by Republicans and Republicans are saying ‘we don’t want to pay up the debt we incurred,’” Khanna added. “I say let’s not negotiate whether we pay our debts. Of course we pay our debts.”