Down Debt

Biden’s world mulls lame action on debt ceiling and increase after 2024

The debate comes as several Republicans have argued for using the debt ceiling to extract concessions from the White House, and reflects growing fears in Democratic and economic circles that the GOP is willing to endanger credit and the financial stability of the country in the pursuit of its political objectives.

The United States has never defaulted on its debt. But such a move would immediately send the economy into a tailspin, drive up interest rates and reverberate around the world.

“It’s just over the top folly to go down this road, but I think the odds increase that we will,” Mark Zandi, chief economist at Moody’s Analytics, said of the cap breach. debt. “If we’re not in a recession by then, we will be.”

The White House is unlikely to land on the way forward before midterm and could still allow the issue to fester until 2023, when a new Congress is sworn in. In public, officials have declined to discuss any priorities beyond the election – insisting that Democrats still have a chance to retain their House and Senate majorities.

Biden, who as vice president was at the center of the Obama-era debt ceiling, ruled out abolishing the debt limit, calling it an “irresponsible” idea. But he seized on Republican rhetoric on the matter in the final days of the midterm campaign, warning that the GOP would bring down the economy if given control of Congress.

“Nothing, nothing, nothing will create more chaos and cause more damage to the American economy than gambling on whether we pay our national bills,” Biden said during a Tuesday appearance in Florida.

Still, within the administration and on Capitol Hill, there’s no doubt that Republicans are poised to take at least the House — and that Democrats will need to move quickly to fully enjoy their final weeks in office.

Democratic leaders are already juggling several competing priorities for the lame session, including efforts to pass a major defense bill, push through exceptional legislation allowing energy and vote on proposals protecting same-sex marriage and strengthening the process. electoral. Congress must also reach a government funding agreement by the Dec. 16 deadline.

Yet as those preparations have intensified in recent days, many Democrats have rallied behind what one person familiar with the discussions described as “growing agreement” that the debt ceiling should be resolved before possible if possible. the end of the year.

“You talk about really tearing up the inside of the country,” an economic adviser to top Democrats said of the threat of a default. “It should take a superhuman effort from rational people to do everything possible to avoid this at the pass.”

Yet the paths forward are limited. The Biden administration is mulling whether to broker a deal with Senate Republicans to lift the cap in the weeks following the midterms, hoping Minority Leader Mitch McConnell will be open to avoid damage economic potential for a stalemate on the debt limit, people familiar with the early strategy said.

The alternative would be for Democrats to use the budget reconciliation process to raise the debt ceiling with just 50 votes in the Senate – an approach that would completely bypass Republicans, but would require a number of procedural steps that could consume valuable time. that legislators had hoped to enshrine. to other last-minute agenda items.

Some Democrats have launched more aggressive proposals, including giving the administration unilateral power to lift the debt ceiling, raising it by an unfathomable amount in order to effectively eliminate it, or pushing Biden to reconsider the debt ceiling. total abolition of the ceiling. In a letter sent earlier this week, 31 House Democrats urged their Hill leaders to “finally end the threat that the federal debt ceiling poses to our economy and our standing in the world.”

But some Biden advisers view the elimination option as politically misguided and much harder to find consensus, even among Democrats.

“It would be a very difficult vote to explain to people that we will borrow as much as we want to borrow without limit,” said a Biden adviser. “Attack ads write themselves.”

Officials remain hopeful that McConnell, who was the Senate’s top Republican during the 2011 debt ceiling stalemate, will want to avoid a repeat of that damaging episode more than a decade later. But his willingness to cooperate may depend at least in part on whether Democrats retain control of the Senate; a proposition that has looked increasingly uncertain in the campaign’s stretch race.

There is less confidence that House GOP Leader Kevin McCarthy will be open to talks, especially in the face of calls from his conservative wing to use the debt ceiling as leverage to negotiate spending cuts. Former President Donald Trump has repeatedly attacked McConnell for not using the debt ceiling as leverage, saying Thursday that Republicans should “impeach” McConnell if he negotiates a debt limitation deal with Democrats.

“If I were the Democrats, I’d try to move an extension during the lame duck,” said Doug Heye, a Republican strategist who was on the House GOP’s leadership staff during the debt ceiling battles. Barack Obama. He added that the party’s conservative base is likely to encourage a fight against the debt limit even if there is no clear exit strategy. “If they don’t, they find themselves in a situation where they have to negotiate with Republicans who don’t really want to negotiate.”

Biden advisers said they were confident Republicans would ultimately be blamed for any consequences of playing chicken with the debt ceiling, stressing that it would be up to McCarthy to keep his caucus restless and sell his demands to the public — as Democrats could unite behind the simple position that lifting the cap should not be up for debate.

But Biden himself has yet to come to that position. Although the White House has said it believes any bill to raise the debt ceiling should be clean and exclude rights reforms as part of any deal to raise the ceiling, it did not. drawn similar lines regarding discretionary spending cuts.

The assumption, in part, is that the specter of economic disaster will do some of the heavy political work for them.

“Each time we take this road, we get closer and closer to the edge of the abyss,” Zandi said. “If they slip even a little, the consequences will be very serious.”

Ben White and Sarah Ferris contributed to this report.