What actually happens if the nation defaults on its debt? Planes fall out of the sky, the streets run red with blood — OK, not literally. But the reality could be economic catastrophe: “Market chaos, economic chaos, all for absolutely no good reason,” explains POLITICO’s Ben White. After a week of debt-ceiling drama in D.C., Ben joins Playbook co-author Eugene Daniels to unpack the partisan fights, doomsday hypotheticals and one of the most absurd twists so far: a trillion-dollar coin.
On the existence of the debt ceiling:
“It is dumb, stupid and bad, and it’s been an absolute annoyance to me for the better part of a decade. It dates back to World War I, and it was instituted just so every time Treasury needed to issue new debt, particularly to fund the war, they wouldn’t have to do another vote every time. They would give the administration and Treasury a bunch of room to work with to raise the borrowing limit. It didn’t become a political weapon until 2010 to now. And it does nothing to limit borrowing. All it does is authorize Treasury to pay the bills that we’ve already incurred from spending and tax cuts and the rest of it. But it is nothing but a huge pain in the butt and a potential catastrophe.” — Ben White
On how the debt ceiling may come up in the midterms:
“This is part of what annoys me so much about [the debt ceiling], because I think the political salience of the debt limit as a vote-moving issue in campaigns — midterm campaigns — is a lot smaller than maybe it would have been during the Tea Party era or eras that were slightly less polarized and there were more swing voters. … I don’t know that there is a huge windfall to be had politically at this point for either saying you took a great stand on debt by not raising the debt limit or beating up the other side for being intransigent on it. So I think it’s like, let’s flirt with wrecking the economy, ruining everybody’s day and week and month and year, tanking the stock market and annoying Ben White and keeping him up late at night. But … I don’t think the politics of it are so big and powerful and vote-moving that it’s worth messing around with it at all. I don’t think Republicans will get punished for raising it. I don’t think Democrats will get punished for raising it. I think everybody just wants to move on. Nobody needs this. Nobody wants this. It’s just a Washington thing.” — Ben White
On minting a trillion-dollar coin (that neither the Treasury nor the White House would ever go for):
“It is a cool, quirky, weird thing that sounds insane, but is actually possible because there is a law on the books that allows Treasury to mint a particular platinum coin at whatever denomination they want, from one penny to $50 quadrillion dollars. One trillion is just the number that a lot of people latched onto because it would be enough to cover our debts and not have us breach the debt limit. So the basic theory is that Treasury mints this actual coin worth a trillion dollars, physically deposits it with the New York Fed, and that money is then in the Treasury bank account and can be used to service our debt and pay our bills and pay bondholders and hence the debt limit is no longer an issue. The White House doesn’t want to do it and the last White House didn’t want to do it. It is, to a degree, the province of nerdy, you know, econ finance Twitter people. But it is not beyond the realm of possibility.” — Ben White