Republicans anxious to avoid a debt default without actually raising the nation’s debt limit have proposed a scheme that would, in their eyes, allow the government to prioritize debt payments, paying off holders of U.S. bonds first and other programs after. The Bipartisan Policy Center has called such a plan “essentially impossible,” noting that Treasury’s computers aren’t capable of prioritizing payments and that, even if they could, such a scheme would prevent the government from making large portions of its payments, which is still a default on legally owed obligations.

Still, Rep. Paul Ryan (R-WI), the chairman of the House Budget Committee, endorsed such a plan today at the House GOP’s annual retreat in Virginia, Slate’s Dave Weigel reports:

“We believe they have the ability to prioritize,” he said. “I’m speaking for myself — I believe Pat Toomey would say the same thing. There’s disagreement about whether that’s true or not.”

Republicans proposed a similar plan during the 2011 debt ceiling debate, but such a plan simply isn’t feasible. Not only is Treasury incapable of prioritizing, but most of the government’s largest bills are due early in the month even though revenues often come in later. And prioritization wouldn’t change the government’s obligation to make those payments — it would simply delay them until Treasury had enough money to make them.

The conservative American Enterprise Institute says prioritization is unworkable, and multiple Republicans who worked in the Bush administration agree. If “there’s disagreement” over the feasibility of such a plan, it exists solely because Republicans like Ryan and Toomey refuse to acknowledge its impossibility.

According to a report from the World Bank, House Republicans are not only threatening the United States economy with their insistence on spending cuts and continued monkeying around with the debt ceiling. The global economy is also at risk:

In an alternative scenario the bank labeled “fiscal paralysis,” the U.S. implements large, across-the-board government spending cuts scheduled to begin in March and Congress provides only a short-term increase in the debt ceiling. That would cause the U.S. economy to shrink by 0.4%, knocking Europe into a deeper contraction and reducing global growth by 1.4 percentage point.

The economic drag from deal that averted the so-called “fiscal cliff” will already hinder growth this year. More spending cuts and the looming possibility of the U.S. defaulting on its obligations would only make the matter worse. As Rep. Jerry Nadler (D-NY) explained, “trying to reduce the deficit right now is wrong, because this position is going to keep the economy in the doldrums and keep the depression going longer and it’s self-defeating.”

President Obama has pledged not to negotiate over the raising of the debt limit. Republicans in the House and Senate have promised not to raise it without extracting more spending cuts. The nation reached the debt limit on December 31 — it is only avoiding it now thanks to “extraordinary measures” from Treasury — and the result of not increasing the limit is almost certainly default. The Treasury will no longer have the authority to pay the bills Congress has already incurred, and by the end of February, the United States will not have enough money to make debt payments, pay Social Security benefits, and keep the government running.

The response to that doomsday scenario from Republicans, however, has been to ignore the perils of not raising the debt ceiling. Members of both the House and the Senate are introducing legislation that will call on the government to prioritize its debt payments to avoid default, as Reuters reports:

Among those advocating the approach is Republican Senator Pat Toomey of Pennsylvania, who is expected to reintroduce legislation next week to instruct the Treasury to make sure bondholders got paid first if Congress does not raise the debt ceiling by the deadline.

In the House of Representatives, Arizona Republican David Schweikert introduced legislation that would force the Treasury to prioritize payments to bondholders, Social Security recipients and military salaries.

Toomey has introduced similar legislation before, but prioritization, however nice it sounds to him and other Republicans, is simply not a workable option. As Tony Fratto, a former White House and Treasury official for George W. Bush, explained on Twitter last night, most of the government’s bills come due at the beginning of each month. That’s when Social Security and an assortment of other benefits are paid. Most of its tax revenue, however, comes in toward the middle of the month. Failure to raise the debt ceiling would force it to wait until it had enough money from tax revenue to make payments of any sort — a strategy that, thanks to its accounting methods, would be virtually impossible, Fratto said.
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Federal Reserve Chairman Ben Bernanke said yesterday that he’d be happy to see the federal debt ceiling — which Congressional Republicans plan to use as leverage to secure deep domestic spending cuts — swept into the dustbin of history. A group of Democratic House members are planning to introduce a bill that would do just that.

Economists largely agree with that sentiment, according to a new survey by The University of Chicago. Of the 38 economists asked, all but one agreed that “a separate debt ceiling that has to be increased periodically creates unneeded uncertainty and can potentially lead to worse fiscal outcomes”:

Some of the economists did not mince words. Anil Kashyap said, “Deciding whether or not to pay the debts incurred to fund the previously approved tax and spending is nuts.” “The debt ceiling is a dumb idea with no benefits and potentially catestrophic costs,” said Richard Thaler. Former White House economist Austan Goolsbee merely said that the debt ceiling is “obviously” a problem.

During an interview with a local newspaper that was published on Tuesday, Republican Senator Lisa Murkowski (R-AK) distanced herself from her party’s plan to use the fast-approaching debt ceiling as leverage to secure deep cuts in domestic spending. Murkowski is the first Republican to denounce Senate Minority Leader Mitch McConnell (R-KY) and Speaker John Boehner’s (R-OH) plan to block a vote to raise the nation’s debt ceiling unless Democrats agree to billions in spending cuts:

Murkowski, at a News-Miner editorial board meeting on Jan. 9, said she doesn’t think the debt limit should be used for political leverage. Since borrowing will be required to pay off debts the country has already incurred, she said it would reflect badly on the U.S. to leave its willingness to pay those bills in doubt. [...]

Murkowski said not all of her colleagues in the Senate will say it out loud, but she believes most agree that failing to raise the debt limit would harm perception of the country.

“If you incur an obligation, you have a responsibility to pay for that,” Murkowski said.

The latest estimate from the Bipartisan Policy Center suggests that the United States could hit its borrowing limit in a month. Last year, Republican opposition to increasing the debt ceiling cost taxpayers an estimated $18.9 billion and as many as 1 million jobs. Playing another game of chicken this year would have similarly devastating consequences.

A group of six House Democrats will introduce legislation tomorrow to abolish the debt limit, a law they say is “unnecessary and increasingly an impediment to Congress’s ability to further economic recovery.” Reps. Jerrold Nadler (D-NY), Hank Johnson (D-GA), Jim Moran (D-VA), Jan Schakowsky (D-IL), Keith Ellison (D-MN), and Peter Welch (D-VT) will announce the legislation at a press conference tomorrow, according to a joint release, in an effort to “move forward with legislation that actually promotes jobs, economic recovery, and growth”:

Only a year-and-a-half after the last disastrous debt ceiling debate, House Republican leaders plan to use the same political brinksmanship again this year in order to impose their extreme and economically regressive agenda on the American people. A repeal of the debt ceiling would allow Congress to move forward with legislation that actually promotes jobs, economic recovery and growth.

A similar group of legislators, led by Nadler, also introduced legislation to abolish the debt limit in 2011, after Republicans demanded spending cuts in exchange for raising it. The result of that debt limit fight was the first credit downgrade in American history and the creation of the so-called “fiscal cliff” that Congress spent the last month trying to undo. The fight also led to increased borrowing costs that totaled $18.9 billion and at least a million jobs.

The United States is one of only two democratic countries, along with Denmark, that has a statutory debt limit that requires the legislative branch to separately authorize borrowing and spending. The Danish congress, however, has “set the ceiling high enough so that it never slows the process of borrowing money and they can avoid political conflicts,” according to ABC News. Yesterday, Federal Reserve Chairman Ben Bernanke said “it would be a good thing” if the U.S. abolished its debt ceiling.

Federal Reserve Chairman Ben Bernanke had a succinct message today for lawmakers looking to monkey around with the debt ceiling — don’t do it. He also blew a hole in the myth that the debt ceiling has something to do with future spending, as opposed to spending already authorized by Congress:

Likening Congress to a family arguing that it can improve its credit rating by deciding not to pay its credit card bill, Bernanke said that raising the legal borrowing limit was not the same as authorizing new government spending.

“It’s very, very important that Congress takes the necessary action to raise the debt ceiling to avoid a situation where our government doesn’t pay its bills,” he told an event sponsored by the University of Michigan.

House Republicans have threatened to take the debt ceiling hostage in order to secure cuts to entitlements and other domestic spending. During a press conference today, President Obama excoriated Republicans for trying to take use the debt ceiling as leverage. “They will not collect a ransom in exchange for not crashing the American economy,” he said. “The full faith and credit of the United States of America is not a bargaining chip.”

Bernanke also revealed today that he reads blogs. “Blogs have become pretty important source of intellectual exchange,” he said.

President Obama today held the final press conference of his first term, and used the opportunity to reiterate that he is not interested in negotiating with House Republicans over the debt ceiling. “They will not collect a ransom in exchange for not crashing the American economy,” Obama said:

Raising the debt ceiling does not authorize more spending. It simply allows the country to pay for spending that Congress has already committed to. These are bills that have already been racked up and we need to pay them…[House Republicans] will not collect a ransom in exchange for not crashing the American economy. The financial well-being of the American people is not leverage to be used. The full faith and credit of the United States of America is not a bargaining chip.

Watch it:

“We are not a deadbeat nation,” Obama reiterated later. The last time that House Republicans threatened to push the U.S. past the debt ceiling, it cost nearly $19 billion in increased interest payments in the national debt. Obama also noted that Speaker of the House John Boehner (R-OH) admitted in 2011 that breaching the debt ceiling would bring about a “financial disaster.”

The new head of the Republican Study Committee — a caucus of ultra-conservative House Republicans — said yesterday that he might favor the United States defaulting on its obligations, rather than raise the debt ceiling. Rep. Steve Scalise (R-LA) posited that, as long as the United States continues to pay interest on its debt, all would be well:

RSC Chairman Steve Scalise (R-La.) said Obama should pledge to avoid defaulting on Treasury bond payments once the Treasury Department no longer has the means to avoid exceeding the $16.4 trillion debt ceiling.

“The fact that we continue hitting the debt ceiling is a symptom of Washington’s spending problem, and hitting the debt ceiling does not immediately trigger a default,” Scalise said. “The Treasury Secretary has an obligation to preserve the credit rating of the United States and should pledge to continue making necessary interest payments to avoid default.”

This is a popular line of thinking on the right, but prioritizing payments doesn’t avoid a default. It simply means that the government will pay off holders of U.S. debt while stiffing any other number of people to whom payments are owed, including veterans or Social Security recipients. As the Bipartisan Policy Center has shown, the executive branch would have some very tough choices should it need to prioritize payments in the way Scalise proposes, and some obligations will have to fall by the wayside.

As Slate’s Matt Yglesias put it, breaching the debt ceiling results in “a deadbeat federal government. Some people won’t get money they’re legally entitled to.” And that will cause untold consequences across the world economy. Scores of government functions would need to be shut down, immediately, and interest rates will spike, affecting financial products (like credit cards and mortgages) around the globe.

Several prominent Republicans have admitted as much, with Speaker John Boehner (R-OH) saying it would be “a financial disaster, not only for us, but for the worldwide economy.” Yet Scalise is treating it like no big deal, in a bid to use the debt ceiling to wring policy concessions from Democrats. The U.S. will exhaust its borrowing ability on or around February 15th, according to the latest estimates.

With Congressional Republicans once again threatening to take the nation’s debt limit hostage for spending cuts, economic circles have been abuzz with the possibility that a standoff could be averted via use of a $1 trillion platinum coin. An obscure law, read literally, gives the Treasury Secretary the ability to mint platinum coins of any denomination. Deposited with the Federal Reserve, such a coin would give the federal government the ability to make payments without needing to issue more debt, defusing the possibility of a default due to the debt ceiling.

The idea has won the endorsement of Nobel Prize winning economist Paul Krugman, a former head of the U.S. Mint, and Harvard Law School Professor Laurence Tribe. “Should President Obama be willing to print a $1 trillion platinum coin if Republicans try to force America into default? Yes, absolutely,” Krugman wrote.

Today, NBC’s Chuck Todd asked White House Press Secretary Jay Carney if the administration had ruled out using the platinum coin option. Carney refused to disavow the idea, instead reiterating that Congressional Republicans should simply raise the debt ceiling:

TODD: Do you guys have a position on this trillion dollar business?

CARNEY: Uh, I would simply go back to what I’ve said. The option here is for Congress to do its job and pay its bills, bills that have already been racked up. [...]

TODD: On the 14th amendment you flatly said you believe you do not have the power under the 14th Amendment. Do you believe you have this power to mint a trillion dollar coin?

CARNEY: There is no Plan B. There is no backup plan. There is Congress’s responsibility to pay the bills of the United States. This is not about future spending. We will have that debate and continue to have the debate about the budgets that we design and the path forward in the deficit reduction. And the president’s principles in this matter are very clear. You know, there is no alternative to Congress raising the debt ceiling. It’s its responsibility. Congress has to pay the bills of the United States. That is an obligation that they assigned to themselves.

TODD: You’re a little evasive in your answer. Are you trying to leave room or not leave room?

CARNEY: There is no substitute for Congress extending the borrowing authority of the United States.

Watch it:

There are several economic arguments made against using the coin, but as Business Insider’s Joe Wisenthal noted, none of them really hold water.

The coin doesn’t allow for new spending; it simply would ensure that America continues to pay bills that Congress has already run up. (The Federal Reserve would also sell bonds in order to prevent inflation.) And with Congressional Republicans threatening to push the country into a default in order to get their way on the budget, it seems that the White House is, for the moment at least, unwilling to take its own last resort off the table, silly as it may sound.