Zinger Key Points
- Khanna laid out several possible executive maneuvers to tackle the situation.
- Options include presenting a legal argument that congressional appropriations already approved must be paid regardless of debt limit.
- Other alternatives include hiking the interest rates on Treasury bonds and minting a $1 trillion coin.
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California Democrat Rep. Ro Khanna (D-CA) has reportedly said the U.S. will not default on its debt but the Biden administration might have to act unilaterally to stave off the crisis.
“The question is whether it’s going to come to unilateral action by the executive branch,” Khanna told Bloomberg News. “I hope it doesn’t,” he added.
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Khanna also laid out several possible executive maneuvers to tackle the situation. He pointed out the options include presenting a legal argument that congressional appropriations which have been already approved must be paid regardless of the debt limit.
Other alternatives include hiking the interest rates on Treasury bonds which is an accounting gimmick that would artificially bring down the face value of U.S. securities but also risk long-term damage to confidence in the market. Minting a $1 trillion coin is another option, he indicated.
However, Treasury Secretary Janet Yellen has rejected the coin idea, expressing doubt that the central bank would accept such a note.
Budget Deficit: Khanna indicated he would like to strategically reduce the defense budget and impose taxes on the very rich — including the billionaires of his Silicon Valley district.
“Budget deficits matter,” he said. “They matter because they increase the interest for the federal government. Ultimately, they matter when they’re a cause of inflation or crowding out private investment,” Khanna added.
Interestingly, Khanna did not mention President Barack Obama, who also ran a deficit, of about $6.8 trillion in his two terms, according to Bloomberg.
“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 said. “I say let’s not negotiate whether we pay our debts. Of course, we pay our debts,” he added.
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