I was writing a post on Mexico, which will come out next week. This writing prompted me to recall a situation during the Clinton Administration where Mexico was about to default its debt and the U.S. Congress was deadlocked and unwilling to help Mexico. Robert Rubin, then Secretary of the Treasury and former CEO of Goldman Sachs, devised an elegant solution by finding an Executive Branch authority to lend money to Mexico. In this congressional deadlock Ruben found a way to avoid congressional approval.
Now I do not think we can find an Executive Branch authority to raise the debt ceiling, although I hope someone examined this possibility (perhaps declaring war on Iraq?). However, there may be some possibilities to postpone the default and thereby give Washington more time to find a compromise. I recognize that time is short but this is my idea:
The Executive Branch could ask for U.S. Government loans to be prepaid, such as foreign aid loans which total about $20 billion, and any other type of loans. I am not expecting full repayment but we might raise $50 billion quickly. Alternatively, perhaps the Executive Branch could repo such loans to the big banks it bailed out in 2008. An outright sale might require congressional approval, but repos might slip by the existing law.
Now the current Secretary of the Treasury, Tim Geithner, was an Under Secretary under Rubin, so hopefully he remembers Rubin's elegant solution. However, he might be distracted by the politics, as everyone in Washington appears to be. I do not actually think there will be a default, but hopefully the Executive Branch has a back up plan.
This has been a comparatively even handed post on a controversial subject, but I cannot fully control my feelings on the subject. There is an old saying that goes something like this "if there is a problem, shoot all the lawyers". If you substitute "Washington politicians" for lawyers my sentiments on the U.S. Government defaulting would be captured very accurately.
Note: The story below from ABC News suggests some other people are thinking about a solution involing Executive Branch authority.