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Debt Limit Showdown Looms as White House Braces for a Divided Washington Debt Limit Showdown Looms as White House Braces for a Divided Washington
(about 9 hours later)
President Biden and Congress are facing a looming showdown with Republicans over raising the nation’s borrowing limit, alarming administration officials, Democrats in Congress and some investors who fear a stalemate that could roil financial markets at a precarious time for the global economy.President Biden and Congress are facing a looming showdown with Republicans over raising the nation’s borrowing limit, alarming administration officials, Democrats in Congress and some investors who fear a stalemate that could roil financial markets at a precarious time for the global economy.
The fight could come to a head as soon as early next year, when the government is projected to hit its borrowing limit unless Congress can muster the votes to raise it. Republicans have vehemently opposed such increases and are threatening to block them outright should they succeed in winning control of one or both chambers in next week’s midterm elections.The fight could come to a head as soon as early next year, when the government is projected to hit its borrowing limit unless Congress can muster the votes to raise it. Republicans have vehemently opposed such increases and are threatening to block them outright should they succeed in winning control of one or both chambers in next week’s midterm elections.
Top Republicans have suggested in recent weeks that they would use any vote to avert a potentially calamitous default on the U.S. government’s debt to force President Biden to accept deep cuts to federal spending that he has said he will not support, potentially including reductions to Social Security and Medicare.Top Republicans have suggested in recent weeks that they would use any vote to avert a potentially calamitous default on the U.S. government’s debt to force President Biden to accept deep cuts to federal spending that he has said he will not support, potentially including reductions to Social Security and Medicare.
That could lead to a crisis similar to one that gripped Washington in 2011, when the nation came within days of defaulting on its debt as Republicans in Congress tried to force a Democratic president, Barack Obama, to accept large cuts in exchange for raising the legal borrowing limit.That could lead to a crisis similar to one that gripped Washington in 2011, when the nation came within days of defaulting on its debt as Republicans in Congress tried to force a Democratic president, Barack Obama, to accept large cuts in exchange for raising the legal borrowing limit.
Fearful of a repeat, a growing number of Democrats have urged party leaders to use a lame-duck session after the election to raise the debt limit substantially should Republicans win a majority, taking the issue off the table before the G.O.P. assumes control.Fearful of a repeat, a growing number of Democrats have urged party leaders to use a lame-duck session after the election to raise the debt limit substantially should Republicans win a majority, taking the issue off the table before the G.O.P. assumes control.
The federal government could hit the debt ceiling in early 2023, though some estimates suggest it could happen later in the year; the Treasury Department can take “extraordinary measures” to continue payments for at least a few months. The cap governs how much the Treasury can legally borrow to finance its debt, based on spending that has already occurred.The federal government could hit the debt ceiling in early 2023, though some estimates suggest it could happen later in the year; the Treasury Department can take “extraordinary measures” to continue payments for at least a few months. The cap governs how much the Treasury can legally borrow to finance its debt, based on spending that has already occurred.
Democrats are discussing a number of options for avoiding a politically and fiscally damaging logjam. They have floated legislation that would allow the administration to raise the debt ceiling unilaterally, rather than requiring a vote of Congress, or eliminate the cap altogether. Some have called for a measure that would raise the borrowing limit by an amount so large that it would effectively punt the next debt fight until after the 2024 presidential election.Democrats are discussing a number of options for avoiding a politically and fiscally damaging logjam. They have floated legislation that would allow the administration to raise the debt ceiling unilaterally, rather than requiring a vote of Congress, or eliminate the cap altogether. Some have called for a measure that would raise the borrowing limit by an amount so large that it would effectively punt the next debt fight until after the 2024 presidential election.
“Under normal circumstances, we’re not going to have to raise the debt ceiling until the fall or winter of 2023, and if Democrats can retain control over the House and the Senate, I think that’s what we’ll do,” said Senator Bernie Sanders of Vermont, the chairman of the Senate Budget Committee, in an interview.“Under normal circumstances, we’re not going to have to raise the debt ceiling until the fall or winter of 2023, and if Democrats can retain control over the House and the Senate, I think that’s what we’ll do,” said Senator Bernie Sanders of Vermont, the chairman of the Senate Budget Committee, in an interview.
Should Republicans take control of at least one chamber of Congress, however, acting in the lame-duck session would be “a wise course of action,” Mr. Sanders said.Should Republicans take control of at least one chamber of Congress, however, acting in the lame-duck session would be “a wise course of action,” Mr. Sanders said.
“I think Democrats have got to be very, very strong in making it clear that Republicans cannot hold hostage the entire world economy in a desire to cut Social Security, Medicare and Medicaid,” he added.“I think Democrats have got to be very, very strong in making it clear that Republicans cannot hold hostage the entire world economy in a desire to cut Social Security, Medicare and Medicaid,” he added.
Republican leaders have suggested they may try to do so.
Representative Kevin McCarthy of California, the minority leader in the lower chamber, has said that he believes the debt ceiling should be raised, but lawmakers should reconsider current spending. He said he would not “predetermine” whether Social Security and Medicare would be part of those discussions.
Senator Mitch McConnell of Kentucky, the minority leader, has consistently said raising the debt limit is essential, but a spokesman declined to comment ahead of the midterms about whether he would seek conditions for any increase.
And Republicans are facing intense pressure from their right flank to force concessions, including from former President Donald J. Trump. On Thursday, Mr. Trump called for Mr. McConnell to face political retribution should he negotiate a deal over the debt ceiling with Democrats, which he has repeatedly done in the past.
“Mitch McConnell keeps allowing it to happen — I mean, they ought to impeach Mitch McConnell if he allows that,” Mr. Trump said, speaking on a conservative radio show. (Mr. McConnell, as a senator, cannot be impeached.)
Mr. Biden has used the Republican threats as a closing argument ahead of the midterm elections, warning of economic damage if control of Congress changes hands.Mr. Biden has used the Republican threats as a closing argument ahead of the midterm elections, warning of economic damage if control of Congress changes hands.
“This is irresponsible,” he told a crowd in Florida this week. “Nothing, nothing, nothing will create more chaos and do more damage to the American economy than playing around with whether we pay our national bills.”“This is irresponsible,” he told a crowd in Florida this week. “Nothing, nothing, nothing will create more chaos and do more damage to the American economy than playing around with whether we pay our national bills.”
Federal law, prolific borrowing and congressional Republicans’ resistance to raising the debt limit have spurred an escalating series of fiscal showdowns since the 2008 financial crisis — with the exception of the first two years under former President Donald J. Trump, when Republicans raised the limit without incident. Federal law, prolific borrowing and congressional Republicans’ resistance to raising the debt limit have spurred an escalating series of fiscal showdowns since the 2008 financial crisis — with the exception of the first two years under Mr. Trump, when Republicans raised the limit without incident. The federal government continues to spend far more money than it collects in tax revenues, even after the expiration of trillions of dollars in emergency pandemic assistance approved in 2020 and 2021. The Congressional Budget Office estimates that Washington will run annual deficits averaging $1.6 trillion over the next decade. That would bring the total debt held by the public to more than $40 trillion, about 110 percent of the projected annual size of the U.S. economy.
The federal government continues to spend far more money than it collects in tax revenues, even after the expiration of trillions of dollars in emergency pandemic assistance approved in 2020 and 2021. The Congressional Budget Office estimates that Washington will run annual deficits averaging $1.6 trillion over the next decade. That would bring the total debt held by the public to more than $40 trillion, about 110 percent of the projected annual size of the U.S. economy.
When the Treasury exhausts its authority to borrow more money, lawmakers will need to raise the debt limit or risk devastating consequences to financial markets that could ripple through the economy. Failing to lift the limit could force the Treasury Department to default on its obligations to bondholders, or to prioritize government payments in a manner that delays or threatens military salaries, Social Security benefits or basic federal services.When the Treasury exhausts its authority to borrow more money, lawmakers will need to raise the debt limit or risk devastating consequences to financial markets that could ripple through the economy. Failing to lift the limit could force the Treasury Department to default on its obligations to bondholders, or to prioritize government payments in a manner that delays or threatens military salaries, Social Security benefits or basic federal services.
Republican leaders say raising the debt limit is essential, but a spokesman for Senator Mitch McConnell of Kentucky, the minority leader, declined to comment on the issue ahead of the midterms.
Representative Kevin McCarthy of California, the minority leader in the lower chamber, has said that he believes the debt ceiling should be raised, but lawmakers should reconsider current spending. He said he would not “predetermine” whether Social Security and Medicare would be part of those discussions.
The impending departure of multiple centrist Republican lawmakers has also heightened fears of a standoff in early 2023. Only one House Republican, Representative Adam Kinzinger of Illinois, who is retiring, ultimately voted to raise the debt limit in 2021.The impending departure of multiple centrist Republican lawmakers has also heightened fears of a standoff in early 2023. Only one House Republican, Representative Adam Kinzinger of Illinois, who is retiring, ultimately voted to raise the debt limit in 2021.
“This is going to be a lame duck that’s not going to be for the fainthearted,” Senator Ron Wyden of Oregon, the chairman of the Finance Committee, said in an interview. Conversations have already begun about how to stave off the threat of cuts to crucial safety net programs or the economic catastrophe that would be unleashed if the United States defaulted on its debt, he said.“This is going to be a lame duck that’s not going to be for the fainthearted,” Senator Ron Wyden of Oregon, the chairman of the Finance Committee, said in an interview. Conversations have already begun about how to stave off the threat of cuts to crucial safety net programs or the economic catastrophe that would be unleashed if the United States defaulted on its debt, he said.
With seven weeks remaining between Nov. 14, when lawmakers return after the midterms, and the start of the new Congress on Jan. 3, it is unclear whether Democrats can muster the time or the political will to take up legislation addressing the debt limit.With seven weeks remaining between Nov. 14, when lawmakers return after the midterms, and the start of the new Congress on Jan. 3, it is unclear whether Democrats can muster the time or the political will to take up legislation addressing the debt limit.
Congress must pass an omnibus spending package to keep the government open after Dec. 16 and the annual defense policy bill. That legislation could include more money for Ukraine in its war against Russia, after Mr. McCarthy suggested a Republican majority would question future aid to Ukraine.Congress must pass an omnibus spending package to keep the government open after Dec. 16 and the annual defense policy bill. That legislation could include more money for Ukraine in its war against Russia, after Mr. McCarthy suggested a Republican majority would question future aid to Ukraine.
Mr. Wyden, like other Democratic officials, did not rule out the possibility of his party trying to unilaterally raise the debt limit during a lame-duck session, by using fast-track reconciliation rules that would prevent a Republican filibuster.Mr. Wyden, like other Democratic officials, did not rule out the possibility of his party trying to unilaterally raise the debt limit during a lame-duck session, by using fast-track reconciliation rules that would prevent a Republican filibuster.
“I’m not going to take anything off the table,” Mr. Wyden said, adding, “I think you’ll find growing amount of concern, particularly about gutting Social Security and Medicare, since this is not as if they haven’t told you what they’re going to do.”“I’m not going to take anything off the table,” Mr. Wyden said, adding, “I think you’ll find growing amount of concern, particularly about gutting Social Security and Medicare, since this is not as if they haven’t told you what they’re going to do.”
But that would sap days of crucial floor time.But that would sap days of crucial floor time.
Other Democrats said they were more concerned about what Republicans may demand in exchange for voting to lift the debt ceiling, including undoing provisions in the Inflation Reduction Act, the signature climate, tax and health care law Democrats pushed through earlier this year.Other Democrats said they were more concerned about what Republicans may demand in exchange for voting to lift the debt ceiling, including undoing provisions in the Inflation Reduction Act, the signature climate, tax and health care law Democrats pushed through earlier this year.
“It’s a loaded gun pointed at the U.S. economy, but fortunately, we actually have a chance to disarm it before it’s too late,” said Representative Brendan Boyle of Pennsylvania, who led more than 30 Democrats in calling on leaders to take action to address the debt ceiling by the end of the year. “If we don’t do this in November or December, we are going to seriously regret it come next year.”“It’s a loaded gun pointed at the U.S. economy, but fortunately, we actually have a chance to disarm it before it’s too late,” said Representative Brendan Boyle of Pennsylvania, who led more than 30 Democrats in calling on leaders to take action to address the debt ceiling by the end of the year. “If we don’t do this in November or December, we are going to seriously regret it come next year.”
Analysts are warning both parties against pushing a debt fight to the brink anytime soon. In part, experts are spooked by a recent financial meltdown in Britain, spurred by an ill-fated government tax-cut proposal, which forced the Bank of England to intervene to stabilize the market for British debt.Analysts are warning both parties against pushing a debt fight to the brink anytime soon. In part, experts are spooked by a recent financial meltdown in Britain, spurred by an ill-fated government tax-cut proposal, which forced the Bank of England to intervene to stabilize the market for British debt.
“The market is fragile as is,” said Donald Schneider, a former chief economist for Republicans on the Ways and Means Committee and the deputy head of U.S. policy at Piper Sandler. “We have other issues going on in the economy and globally that suggest now is not the time for a fight” on the debt limit.“The market is fragile as is,” said Donald Schneider, a former chief economist for Republicans on the Ways and Means Committee and the deputy head of U.S. policy at Piper Sandler. “We have other issues going on in the economy and globally that suggest now is not the time for a fight” on the debt limit.
Mr. Schneider said Mr. McCarthy would face strong pressure from his conference to use the limit to extract at least modest spending cuts.Mr. Schneider said Mr. McCarthy would face strong pressure from his conference to use the limit to extract at least modest spending cuts.
“If Democrats want this to be easy,” he said, “they should think of ways for Republicans to save face.”“If Democrats want this to be easy,” he said, “they should think of ways for Republicans to save face.”