WASHINGTON -- Reiterating a threat he first issued in the summer of 2011, President Barack Obama warned Republicans on Monday that older Americans might not get their Social Security checks and veterans won't get timely benefits if Congress fails to increase the government's borrowing authority.
Republicans are insisting on spending cuts in exchange for raising the $16.4 trillion debt ceiling. Obama vowed not to negotiate on their terms. "We are not a deadbeat nation," he declared, creating an inevitable showdown with congressional Republicans.
The government could run out of cash to pay all its bills in full as early as Feb. 15, according to one authoritative estimate. That means Washington could once again plunge into political brinkmanship as it did in 2011 when Congress ultimately raised the debt ceiling, but only after Obama agreed to broad spending cuts.
Yesterday, Obama said Congress should act. "The full faith and credit of the United States of America is not a bargaining chip," he said.
"Republicans in Congress have two choices here," Obama said. "They can act responsibly, and pay America's bills, or they can act irresponsibly and put America through another economic crisis. But they will not collect a ransom in exchange for not crashing the American economy."
Without an agreement, every option facing his administration would be unprecedented.
It would require a degree of financial creativity that could test the law, perhaps even the Constitution. It could shortchange Social Security recipients and other people, including veterans and the poor, who rely on government programs.
It could force the Treasury to contemplate selling government assets, a step considered but rejected in 2011. In short, the Treasury would have to create its own form of triage, creating a priority list of its most crucial obligations, from interest payments to debtors to benefits to vulnerable Americans.
"It may be that somewhere down the line someone will challenge what the administration did in that moment, but in the moment, who's going to stop them?" asked Douglas Holtz-Eakin, a former director of the Congressional Budget Office. "I pray we never have to find out how imaginative they are."