“President Joe Biden and his staff have said repeatedly he is willing to sit down with House Speaker Kevin McCarthy to negotiate a compromise on government taxes and spending.
Biden has also said, repeatedly, that he is unwilling to negotiate over raising the debt ceiling.
These things may seem contradictory. They are not, and the somewhat subtle distinction between the two is important for understanding what is happening in Washington, DC, this summer.
Congress has two important deadlines coming up.
One is the day that the US officially hits the debt ceiling, and cannot borrow more money from bond markets without further congressional authorization.
We don’t know when that day will be, exactly — but we have a guess. In a Monday letter to McCarthy and other lawmakers, Treasury Secretary Janet Yellen said that “our best estimate is that we will be unable to continue to satisfy all of the government’s obligations by early June, and potentially as early as June 1” without a debt ceiling increase.
Once we reach that date, the federal government will not be able to pay its bills, or for things like Social Security checks, payroll for service members and other federal employees, and Medicare reimbursements. Interest payments on past debt could go unpaid, which would mean the US government would default on its debts.
The US would almost certainly enter a recession, probably a quite severe one, and the whole world could face a massive financial crisis. Beth Ann Bovino, chief US economist at Standard and Poor’s, was hardly alone in 2017 when she predicted that “the impact of a default by the U.S. government on its debts would be worse than the collapse of Lehman Brothers in 2008.”
The second deadline is September 30, 2023, the date that funding for the federal government runs out. If Congress does not pass funding bills lasting beyond that date, then on October 1, the federal government will “shut down” as it has done many times before, with many federal employees going without pay and “non-essential” services shutting down, but ordinary operations like Social Security, Medicare, and the military continuing.
Biden is willing to negotiate over the latter. He is not willing to negotiate over the former, as he reminded everyone anew in his invitation to congressional leaders for a May 9 debt ceiling discussion at the White House.
Whether he and McCarthy can navigate those distinctions and negotiate in good faith will likely determine whether the US tips into crisis in the next few months.”
…
“Biden’s principled case against bargaining over the debt ceiling is that doing so is effectively bargaining over policies Congress has already passed.
When Congress passed an omnibus spending bill in December 2022, it authorized specific amounts of funding for the rest of the fiscal year, which ends on September 30.
Congress has also, through literally hundreds of bills over the years, dictated the levels of tax on personal income, corporations, payroll, tobacco, etc. The revenue from these taxes do not come close to paying for the spending Congress has also authorized — meaning it has to borrow to pay for its obligations.
So the White House sees a debt ceiling bill as simply Congress agreeing to pay for spending it’s already approved, and obeying the 14th Amendment’s dictate that the federal government must always pay its debts.
“Like the President has said many times, raising the debt ceiling is not a negotiation; it is an obligation of this country and its leaders to avoid economic chaos,” press secretary Karine Jean-Pierre explained in January. “Congress has always done it, and the President expects them to do their duty once again. That is not negotiable.”
By contrast, arguing over the budget is arguing over future spending, which is a proper thing for the White House and Congress to debate with each other.”
“The bipartisan Problem Solvers Caucus—made up of 31 Republicans and 32 Democrats—has reportedly crafted a debt limit proposal that calls for Congress to return to so-called regular order for the passage of annual budget bills. That means the dozen appropriation bills that make up the federal budget would go through the full congressional process, including committee hearings and individual votes for each, rather than being rolled together in the massive omnibus packages that Congress has relied upon in recent years.
According to a draft proposal from the caucus published Wednesday by Axios, a return to regular order would be one of several changes the lawmakers in the group would demand as part of a debt ceiling deal. They’re also asking for the creation of a new fiscal commission to make recommendations on stabilizing the federal government’s dangerously high levels of debt, and the adoption of budget controls (similar to those that were in place between 2011 and 2018) to limit future spending increases.
If those terms are agreed to, the group’s framework would raise the debt ceiling to a level that won’t be reached until after 2025—in other words, until after the next election.
On their own, those proposals won’t solve America’s serious fiscal challenges. But they would be a series of good first steps toward taking the mess seriously and would avert the potentially catastrophic debt default that looms over everything in Washington right now.”
“”A bloc of at least eight corn belt Republicans are a hard ‘no’ on” House Speaker Kevin McCarthy’s (R–Calif.) bill to raise the debt ceiling unless proposed cuts to ethanol tax credits are removed from the package, Axios reported Tuesday. That group reportedly includes all four members of Congress who represent Iowa and at least four other Republican lawmakers from other “corn belt” states.
Because Republicans have a slim 222–213 majority in the House, any group of five lawmakers can hold considerable leverage by threatening to vote against a bill.”
…
“this is yet another warning about the dangers of creating government subsidies in the first place.
Even though they cost taxpayers billions of dollars every year, federal ethanol subsidies and tax credits are a tiny chunk of the overall federal budget. Yet they are incredibly valuable to the farming communities that reap those benefits—and that vote to elect lawmakers who promise to keep the federal cash flowing. For the members of Congress from Iowa and other Midwestern states, voting to cut those subsidies could be a career-ending move. On the other side, there’s no significant voting block demanding the removal of ethanol subsidies—even though biofuels are expensive, ineffective, and bad for the environment—so the lawmakers more intensely committed to their special interests usually get what they want.”
“The U.S. will default on its $31.4 trillion debt this year if Congress doesn’t raise the nation’s borrowing cap. But when, exactly? That’s harder to answer.
While Congress sets the nation’s annual budget, the Treasury Department actually manages trillions of dollars beyond that, with millions of payments flowing in and out of the government’s accounts each day. And just like an everyday checking account, cash flow varies: Sometimes the government gets a flood of dollars from tax receipts, and other times it needs to pay the bills. Those dips and surges add another wrinkle to a political drama that threatens to tank the global economy.
By this summer or early fall, unless Congress acts before then, the U.S. government will be so cash-strapped it won’t be able to pay interest and principal to the country’s lenders. But before the nation reaches that point of default, it could come alarmingly close several times over the next few months as spending and revenue rise and fall — a fluctuation that could spook Wall Street, escalate pressure on negotiations between congressional leaders and President Joe Biden, and potentially force a short-term fix.”
“Even if McCarthy is able to push his debt limit bill to House approval, the legislation is dead-on-arrival in the Democratic-controlled Senate. Instead, the GOP debt bill is effectively a messaging tool for Republicans in their push for talks with President Joe Biden, who has thus far insisted on a no-strings-attached increase of the debt limit.
The Treasury Department has already been using “extraordinary measures” for months to hold off a default while an unclear “X-date” looms. But there could be more clarity soon: The Congressional Budget office and the Bipartisan Policy Center are planning to release updated projections the second week of May.”
“In addition to Republicans’ pledge to slice $130 billion from the $1.7 trillion government funding package that passed in December, conservatives want to take the process old-school. Rather than passing one massive bill, they’re calling for individual votes on the dozen appropriations bills that set annual budgets for different agencies, a more time-consuming but transparent procedure that recent Congresses have struggled to complete.
They’re also planning to allow an amendment free-for-all, which is all but certain to further drag out or trip things up.
Additionally, House Republicans say they’ll refuse to negotiate with the Senate until the upper chamber passes its own spending bills, which hasn’t happened in years. Typically, Senate appropriators have instead entered into bipartisan talks with their House counterparts, only burning valuable floor time on a package they’re certain would pass both chambers.
And GOP demands expand beyond funding the government. Republicans say they won’t back a debt limit increase unless they get their way on spending cuts or measures to reign in the ever-increasing $31 trillion debt. The timing of that could be tricky, however, as the Treasury Department could hit its credit card limit this summer, while federal cash expires on Sept. 30.
A debt ceiling hike will arguably make for a much bigger battle in Congress, leaving even less time and patience for bipartisan talks on funding the government.”
“The US is currently projected to hit its existing debt ceiling sometime in 2023, according to the Bipartisan Policy Center. While raising the ceiling should be relatively straightforward, it’s become a contentious process — and an opportunity for the minority party to extract policy concessions or score political points. Both parties have used debt ceiling increases to their advantage, but Republicans have done so much more frequently in recent years.
In 2011, for example, Republicans balked on suspending the debt limit and refused to move forward until President Barack Obama agreed to key spending cuts, concessions they ultimately secured. The US got so close to default that year, however, that Standard and Poor’s downgraded the country’s credit rating.
Political experts note that this disagreement marked one of the first times it seemed like lawmakers were actually willing to go over the edge, despite the economic chaos that could ensue. Were the US to actually default, that would likely downgrade the dollar and lead to a recession.
While a default has never happened, Republicans’ behavior in 2011 — and their current rhetoric — suggests that they’re more open to the possibility and taking such fights to that point.
Democrats, including in the White House, are reportedly considering preempting this worst-case scenario by tackling the debt ceiling this winter, according to Axios. The White House has denied that such conversations are happening.
There are also still questions about what a debt ceiling bill could look like. While some lawmakers including Sen. Jeanne Shaheen (D-NH), and a group of prominent House Democrats, have expressed support for doing away with the debt ceiling altogether, others, like Biden and Sen. Bernie Sanders (I-VT), have opposed taking this route. That’s likely because such talks still offer an opportunity to evaluate spending, and because it could be a useful tool for Democrats should the GOP hold the White House and Congress.
In lieu of getting rid of the debt limit altogether, there’s been growing pressure on Democrats to consider increasing it to such a high value that there isn’t likely to be a standoff over the issue in the short term.”
“Lawmakers voted 50-49 to raise the debt limit by $2.5 trillion, a figure that’s expected to tide the government over until after the midterm elections next fall. Every one to two years, it’s vital for the US to address the debt ceiling to cover past spending and make sure the government doesn’t default; if it did, it would likely have catastrophic economic consequences globally.
Interestingly, the resolution succeeded because it did not require 60 votes to clear a filibuster in the Senate after lawmakers passed a bill last Thursday granting a one-time exception to the rule.
The deal to suspend the filibuster was bipartisan; leaders of both parties have hesitated to make exceptions to the filibuster, a procedural rule requiring a Senate supermajority to pass legislation, if it gets blocked by the opposition. Senators were willing to make an exception in this case, for two reasons.
One, it enabled Democrats to approve the debt limit resolution on their own, with no Republican support. Republicans wanted to withhold their votes in hopes of weaponizing Democrats’ vote to raise the debt ceiling in future campaigns. Two, the deal allowed a vote to be held quickly, narrowly avoiding the December 15 default deadline calculated by Treasury Secretary Janet Yellen.
This last-minute deal enabled lawmakers to avert a debt default and massive economic crisis while overcoming a partisan impasse on the subject. For some Democrats, too, it revealed that exceptions to the filibuster are possible — and an option lawmakers should consider for other bills.”
…
“The debt ceiling vote has opened the door to questions of whether Democrats would consider filibuster exceptions for other bills, like voting rights protections. Activists, and some Democratic lawmakers, have called for this in recent months amid failures to advance voting rights protections, police reform, and a $15 minimum wage due to GOP opposition in the Senate. But a filibuster exemption for policy changes is likely to be difficult to secure.
This time around, Democrats were only able to get an exception because it was for something Republicans actually wanted. Though there was enough GOP opposition to raising the debt limit that getting 60 Senate votes was in doubt, Republican leaders like Senate Minority Leader Mitch McConnell did not want the US to default. Those leaders made sure the exception passed for the good of the domestic and global economy. Without Republican support, Democrats likely wouldn’t be able to approve another exception in this same way.
That leaves Democrats with another challenging option: banding together for a rules change. Those sorts of modifications can be done by majority vote. But that would require the support of all 50 Democratic caucus members, which party leaders don’t currently have. Moderate Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) have staunchly opposed such changes thus far.
Still, this development has made it clear lawmakers do have another option to consider for bills that can’t pass via budget reconciliation, and has set a recent precedent for such carveouts. Now that it’s been done once, expect to hear calls to do it again. In fact, this filibuster carveout has sparked new conversation about how else this tactic could be used.”
“it’s likely that many Americans don’t understand what the debt ceiling is or what raising it entails. Consider the high share of respondents who said they were unsure in The Economist/YouGov’s survey. Part of what’s tricky here is the debt ceiling refers to debt and financial obligations the U.S. has already accrued — such as interest on the country’s debt or previously authorized spending, like Social Security benefits. That is, the debt limit is not a tool that authorizes new spending, as such expenditures are decided in completely separate legislation, like a bill for the next federal budget.”
…
“past polls back up the idea that many people don’t grasp what it is or what the risks are if it’s not increased. In a 2013 HuffPost/YouGov poll, for instance, 42 percent of Americans correctly responded that a higher debt ceiling allowed the country to pay interest on its debt and spending that’s already been authorized, but 39 percent mistakenly said that the debt ceiling directly increased government spending and the amount of debt the U.S. holds. This survey also found plenty of uncertainty, as 20 percent said they weren’t sure what raising the debt ceiling meant. A poll by the Washington Post/Pew Research Center from 2011 — when the debt-ceiling debate was particularly fraught — also reflected a misunderstanding of the consequences of raising or not raising the debt limit. In the poll, more Americans were worried about what would happen if the debt ceiling was raised than if it wasn’t: 48 percent were more concerned that raising the debt ceiling would lead to more spending and debt, while 35 percent were more worried that not raising the cap would force a debt default and cause economic harm.”