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Friday, January 27, 2023

Khanna: Biden may have to take unilateral action to avoid debt crisis

Rep. Ro Khanna (D-Calif.) suggested Monday that President Biden may have to take unilateral action to avoid a debt ceiling crisis.

“I think we’re going to have a tough time,” Khanna told Bloomberg News. “It’s not good 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 lead to unilateral action by the executive branch,” he said, adding: “I hope not.”

The United States 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 tried to link a debt ceiling increase to spending cuts, something impossible for Democrats in Congress and the White House, who have called for a clean debt limit increase. .

This potential showdown has raised growing concerns that the US could default on its debt and trigger a global economic crisis.

In response, Khanna suggested several ways the Biden administration could take unilateral action on the issue. One method the California Democrat proposed, minting the $1 trillion coin, has already been largely dismissed by Yellen.

“It should by no means be taken for granted that the [Federal Reserve] I would, and I think especially with something that’s a gimmick,” Yellen told the Wall Street Journal on Sunday. “The Fed is not required to agree to it, there is no requirement from the Fed. It is up to them what to do.”

Khanna also raised the possibility that the Treasury could issue higher interest rate bonds, essentially using an accounting trick to allow the US to continue paying down its debts. However, this method could lower confidence in the market, Bloomberg News noted.

Biden could also argue that the US government ignores the debt ceiling in favor of sticking with spending that Congress has already approved, Khanna said.

A pair of law professors from Cornell University and the University of Florida have previously defended this as the “least unconstitutional option,” alleging that Congress has given the president multiple terms, to meet his authorized limit on spending, taxes and debt, which cannot all be met at once if the debt ceiling is reached, according to Vox.

Khanna also criticized the House Republicans’ stance on the debt ceiling in his interview with Bloomberg News, pointing to the debt accumulated under the leadership of the GOP.

“We’re looking at paying off the debt that’s been largely accumulated by the Republicans, and the Republicans are saying ‘we don’t want to pay off the debt that we’ve incurred,’” Khanna added. “I say that we do not negotiate if we pay our debts. Of course we pay our debts.”

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