US Debt Ceiling Negotiations and the Threat of Default
As the deadline for raising the US debt ceiling approaches, negotiations between President Joe Biden and the House GOP continue.[0] Nine days remain until the “X-Date”, on which the US government may no longer be able to meet all of its financial obligations.[1] The debt ceiling is a legal limit on how much the US government can borrow to pay for its spending. If the ceiling is not raised by Congress, the government will be unable to borrow the money it needs to pay its debts, potentially triggering a catastrophic default that could send shockwaves through the global economy.
President Biden has drawn two lines in the sand: the United States will not default on its debt, and he will not negotiate over legislation to prevent such a cataclysm.[2] In the end, it appeared that neither party was in favor of a default.[2] Raising the debt ceiling simply allows the Treasury Department to fund the expenditure that Congress has already approved.[2] Republicans were not entitled to any concessions from Democrats in return for their support in averting a financial catastrophe.[2] In order to ensure government funding, both parties will have to come to a compromise regarding the federal budget.[2] The GOP had no justification to exploit the possibility of causing economic harm as a means to gain additional bargaining power in fiscal discussions.[2]
[2] Before last year’s midterm elections, the GOP had made a commitment to accomplish a similar feat.[2] The House GOP's stance lacks coherence if Social Security and Medicare are not subjected to cuts.[2] But the notion that Biden could have secured a better deal if only he’d adopted a more aggressive opening stance and/or messaged the fight better is plausible but not obviously correct.[2] The White House has gone on “offense” in some areas during negotiations, proposing the closure of various tax loopholes dear to the GOP donor class, but there is no indication that this has caused McCarthy to moderate his demands.[2]
House Speaker Kevin McCarthy has been insisting this week that the only “concession” House Republicans will offer to Democrats is raising the debt ceiling. It is hardly a concession. Both publicly and privately, Democrats have expressed concern that the President's response to the Republican's negotiation tactics has not been forceful enough. They fear that their lack of understanding of the process could hinder their ability to gather support when a bipartisan agreement is eventually presented in the House.[3]
The Republicans who are engaged in the negotiations have recognized that they would require the assistance of Democrats in order to get any legislation passed in the House. This is because it is probable that they will lose the support of almost all of the roughly three-dozen conservatives in the House Freedom Caucus.[3] In order to pass any agreement, both Biden and McCarthy will require the support of House Democrats.[4] The House is currently controlled by a slim Republican majority, while the Senate is in favor of the Democrats with a one-seat advantage.[5] It is essential for negotiators to formulate a legislation that can be approved by both houses.[5] The path of any final deal through Congress will be complicated by Republican demands for policy changes that most Democrats would not support.[5] It is anticipated that McCarthy will face losing many of his conservative members if he agrees to any deal with the White House.[6] This implies that the California Republican will need to depend on support from the Democrats in order to successfully pass the bill.[6]
The inclusion of conservative demands in the bill may render enough of McCarthy’s conference unwilling to settle for anything less.[7] To demonstrate their unity in ongoing negotiations with the White House, House Republicans have made media appearances and communicated with their constituents to emphasize the necessity of raising the debt ceiling. They have explicitly stated that their bill is the only viable option, aligning with what they have long maintained should be done.[8] This take it or leave it position may have been convinced by enough Republicans, and possibly even McCarthy himself.[8] When asked what concessions Republicans are willing to make in the continuing talks, McCarthy replied, “We’re going to raise the debt ceiling.” Nothing else.
Legal experts argue that Section 4 of the 14th Amendment allows the Treasury Department to keep borrowing money past the debt limit and that it would be unconstitutional for the US to fail to make payments. By invoking the 14th Amendment, the debt limit would be terminated, enabling the Treasury to make complete payments without any hindrance. Earlier this month, Biden expressed his contemplation of utilizing the 14th Amendment to bypass the debt ceiling, however, he expressed uncertainty about its effectiveness.[9]
As negotiations continue, recent polling shows that the public would blame Biden and Republicans in equal measure if the country defaults.[10] The GOP has gained support from a majority of Americans who believe spending cuts should be included in a compromise deal. However, this has also raised concerns among Democrats who feel their party has not adequately conveyed the importance of the situation.[10] An even darker theory is that the GOP actually has no political incentive to avoid a default, assuming that Biden as the incumbent president will get the blame, and the GOP will benefit in the 2024 elections.[11]
On Wednesday, leaders of the House Democrats announced that every single one of the 213 members in their Democratic Caucus has signed a discharge petition aimed at going over McCarthy's head and compelling a vote on increasing the debt ceiling.[12] House Minority Whip Katherine M. Clark said it is “another sign of the unity that we have” and “we know who we are fighting for — it’s the American people, and that’s what continues to drive our work.[12]
0. “White House, Republicans Reportedly Nearing Deal to Raise Debt Limit” Voice of America – VOA News, 25 May. 2023, https://www.voanews.com/a/biden-us-debt-ceiling-talks-going-well-but-no-deal-reached-yet-/7109521.html
1. “What Is Biden's Endgame in the Debt-Ceiling Standoff?” The New Yorker, 23 May. 2023, https://www.newyorker.com/news/our-columnists/what-is-bidens-endgame-in-the-debt-ceiling-standoff
2. “Is Joe Biden Botching the Debt Ceiling Fight?” New York Magazine, 25 May. 2023, https://nymag.com/intelligencer/2023/05/is-joe-biden-botching-the-debt-ceiling-fight.html
3. “In debt ceiling talks, House Dems worry over Biden’s approach with GOP” The Washington Post, 25 May. 2023, https://www.washingtonpost.com/politics/2023/05/24/debt-ceiling-negotiations-house-democrats/
4. “McCarthy sends GOP negotiators to White House 8 days before potential default” ABC News, 24 May. 2023, https://abcnews.go.com/Politics/mccarthy-speak-amid-signs-progress-talks-avoid-default/story?id=99569057
5. “What Republicans want in exchange for raising the debt limit” CNBC, 25 May. 2023, https://www.cnbc.com/2023/05/25/debt-ceiling-news-demands-republicans-are-making.html
6. “Democrats have warning for White House that their support for debt deal is not guaranteed” CNN, 26 May. 2023, https://www.cnn.com/2023/05/25/politics/democrats-warning-white-house-debt-deal/index.html
7. “Democrats unanimously back debt ceiling discharge petition” The Hill, 24 May. 2023, https://thehill.com/homenews/house/4019483-democrats-unanimously-back-debt-ceiling-discharge-petition/
8. “Kevin McCarthy's Hardest Job Will Be Selling a Debt-Limit Deal to Conservatives” Barron's, 25 May. 2023, https://www.barrons.com/articles/debt-ceiling-mccarthy-congress-compromise-79f609ce
9. “What is 14th Amendment and can it resolve US debt ceiling fight?” Al Jazeera English, 25 May. 2023, https://www.aljazeera.com/economy/2023/5/25/what-is-the-14th-amendment-and-can-it-resolve-us-debt-cap-fight
10. “Democrats to Biden: Get ‘off the bench' in the debt limit fight” POLITICO, 25 May. 2023, https://www.politico.com/news/2023/05/25/democrats-to-biden-get-off-the-bench-in-the-debt-limit-fight-00098861
11. “Debt ceiling negotiations: Are Republicans just posturing? Or is a deal really out of reach?” Vox.com, 25 May. 2023, https://www.vox.com/politics/2023/5/25/23736296/debt-ceiling-mccarthy-biden-talks-default
12. “House Dems’ discharge petition clears one hurdle, with more to go” MSNBC, 25 May. 2023, https://www.msnbc.com/rachel-maddow-show/maddowblog/house-dems-discharge-petition-clears-one-hurdle-go-rcna86255
