Treasury Secretary Janet Yellen says the U.S. will hit the debt limit — currently $31.4 trillion — on Thursday, intensifying a high-stakes political battle already underway in Washington.
Some House Republicans want to leverage must-pass legislation to raise the nation's borrowing authority to extract federal spending cuts in an effort to balance the federal budget — but that could mean looking for cuts in some of the country's most popular social programs.
"Look, you only have so many leverage and negotiating points. The debt ceiling is one of those. Nobody in America wants us to blindly just raise the debt ceiling again if we don't get structural reforms around here. Nobody wants that," Rep. Chip Roy, R-Texas, told reporters last week.
Roy was part of a group of hard-right conservatives who extracted handshake agreements from Rep. Kevin McCarthy, R-Calif., in order for him to get their votes to become House speaker. As part of that, McCarthy is pledging to fight for spending cuts at all turns in this Congress.
President Biden and congressional Democrats say they will not engage in negotiations on the nation's borrowing authority. "Congress must deal with the debt limit and must do so without conditions," White House press secretary Karine Jean-Pierre reiterated this week.
The Treasury Department says "extraordinary measures" to cover the debt will be exhausted by June. If Congress fails to raise the debt limit before then, it will result in an unprecedented debt default, which could have catastrophic economic consequences worldwide.
Even political brinkmanship around raising the debt limit can have consequences, as it did in 2011, when a standoff between congressional Republicans and the Obama administration roiled the stock market and led to the first ever credit rating downgrade for the U.S. government.
"After witnessing a month of wrangling over raising the debt ceiling, they doubted our political system's ability to act," President Barack Obama said at the time.
This time, Republicans are raising the stakes — and their demands
First, many Republicans want concessions in the form of steep cuts in annual discretionary spending bills that cover every aspect of the federal government, except for the Defense Department. Rep. Mark Amodei, R-Nev., sits on the House Appropriations Committee, which determines that annual spending, and he points out that nonmilitary discretionary spending is a tiny fraction of what drives the debt.
"But if you want to be honest about it and you're saying the budget's a big deal, it's like, well, you got to go where the money is," he says. And that money is in entitlements that make up the nation's social safety net: Medicare, Medicaid, Social Security. If some Republicans want to try to change those, Amodei has a piece of advice for them: "Better have your helmet and your chin strap on."
The Republican Party does not have a successful track record when it comes to trying to change the social safety net. Former President George W. Bush tried and failed to overhaul Social Security for future retirees. Then-Rep. Paul Ryan's support for shifting Medicare from a guaranteed benefit to a voucher system was a core target of Democratic attack in the 2012 presidential race, when Ryan was Mitt Romney's running mate. One liberal group ran a now-infamous wordless attack ad that depicted a Ryan look-alike pushing a granny off a cliff.
For deficit hawks like Maya MacGuineas, who runs the nonpartisan Committee for a Responsible Federal Budget, a new round of debating the nation's fiscal future is — on the one hand — quite welcome. "We are getting to the point where you just can't delay it much longer at all because both of the trust funds for those programs are heading toward insolvency in a very short amount of time," she says.
But on the other hand, MacGuineas says, Congress should never flirt with a debt default to try to extract those budget reforms. "There should be no discussion of defaulting, anywhere. The most important thing is we lift this debt ceiling without drama."
Leslie Dach worked in the Obama administration and now runs the liberal health care advocacy group Protect Our Care. He says Republicans are pushing for a political fight with no clear plan for a policy win, with Democrats unified in opposition and in control of the Senate and White House. "Lighting the fuse and thinking that you can stomp it down before it reaches the dynamite is not a very good strategy," he says.
McCarthy faces a delicate balancing act of assuring the public that his party will not allow a debt default, as he did again last week.
"We don't want to put any fiscal problems through our economy, and we won't," he told reporters, at the same time insisting that Republicans will cut spending. "We've got to change the way we are spending money wastefully in this country, and we're going to make sure that happens."
For now, McCarthy is the only leader at the negotiating table. [Copyright 2023 NPR]
