Joe Biden, the president, still maintains control of Congress. However, his administration is clearly getting ready for its first significant battle with a newly assertive Republican party.
Senior Biden officials and supporters are looking at several debt-ceiling raising options in an effort to avoid a standoff with Republicans the next year that might further destabilise the financial markets and jeopardise the nation’s nascent economic recovery.
Private discussions have mostly centred on whether Congress can and should agree to raise the debt ceiling during the lame-duck session, or, in a hint of the serious worries within the party, utilise a procedural manoeuvre that would allow Democrats to pass an increase unilaterally. A debt limit increase that would last through the 2024 election is being considered, which would effectively stop the commotion for the remainder of Biden’s term.
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The debate comes at a time when several Republicans have called for using the debt ceiling to pressure the White House for concessions. It also reflects growing concerns in Democratic and financial circles that the GOP may be willing to jeopardise the nation’s credit rating and financial stability in order to advance its political objectives.
The United States has never missed a debt payment. But if it were done, the economy would collapse, interest rates would soar, and it would have a global impact.
A breach of the debt ceiling would be “over-the-top madness,” but Mark Zandi, the senior economist at Moody’s Analytics, believes the likelihood that this will happen is increasing. “If not by then, we will be in a recession.”
Bernie Sanders wants Democrats to raise the debt limit this year if the GOP winshttps://t.co/7ix7UnKs07
— Steven Dennis (@StevenTDennis) November 3, 2022
The White House may not decide on a course of action until after the November elections, and it may still let the matter drag into 2023, when a new Congress will be sworn in. In order to protect Democrats’ chances of keeping their majorities in the House and Senate, leaders have declined to publicly discuss any goals beyond the election.
Biden, who was at the centre of the Obama administration’s debt ceiling brinkmanship as vice president, has ruled out doing away with the debt ceiling, calling it a “irresponsible” proposal. He has, however, grabbed on Republican talking points surrounding it in the closing days of the midterm election, warning that if the GOP wins control of Congress, the economy will collapse.
Playing around with whether or not we pay our national bills will bring about greater chaos and harm the American economy, said Biden during a speech Tuesday in Florida.
However, there is little doubt on Capitol Hill or within the administration that Republicans will win at least the House, and that Democrats will need to act swiftly to make the most of their remaining weeks in power.
Democratic leaders are already balancing a number of conflicting agenda items for the lame-duck session, including attempts to approve a significant defence bill, advance unfinished energy permitting legislation, and vote on measures safeguarding same-sex marriage and strengthening up the election process. Before the deadline of December 16, Congress also needs to come to an agreement on government funding.
However, as those preparations have gotten more serious lately, many Democrats have come around to what one person with knowledge of the conversation called a “growing understanding” that the debt ceiling issue needs to be resolved as soon as humanly possible before the end of the year.
One economic consultant to high-ranking Democrats said of the possibility of a debt default: “You’re talking about literally tearing out the insides of the country.” Rationally thinking people would have to exert superhuman effort to prevent this from happening in the first place.
The options for moving forward are still few. According to those with knowledge of the early planning, the Biden administration is considering whether to work out a deal with Senate Republicans to raise the cap in the weeks following the midterm elections in the hopes that Minority Leader Mitch McConnell will be receptive to avoiding the potential economic harm of a debt limit standoff.
The alternative would be for Democrats to raise the debt ceiling with just 50 Senate votes using the budget reconciliation process. This would completely avoid Republicans but necessitate a number of procedural steps that could eat up valuable floor time that lawmakers had hoped to devote to other last-minute agenda items.
Some Democrats have put forth more extreme ideas, such as giving the administration sole authority to raise the debt ceiling, increasing it by an absurd amount to essentially eliminate it, or pressuring Biden to rethink doing away with the cap entirely.
The Hill leadership was encouraged by 31 House Democrats to “permanently stop the threat that the federal debt ceiling poses to our economy and our standing in the world” in a letter that was sent earlier this week. However, some of Biden’s advisors believe that eliminating the choice would be politically foolish and far more difficult to agree on among Democrats.
One of Biden’s advisers observed, “It would be very difficult to convey to people that we will borrow as much as we want to borrow with no constraints.” “The attack ad copy writes itself.”
Officials continue to hold out hope that McConnell, who presided as the leading Senate Republican during the damaging debt ceiling crisis in 2011, will be motivated to prevent a recurrence of that unfortunate incident more than ten years from now. However, his willingness to cooperate may depend, at least in part, on Democrats maintaining control of the Senate, a prospect that has grown less likely as the campaign has neared its conclusion.
Senior WH & Hill Dems are weighing options for raising the debt ceiling in the lame duck — a pre-emptive move driven by growing fear a House GOP majority would risk tanking the economy in pursuit of its goals: https://t.co/m7rOKeRSKV
— Adam Cancryn (@adamcancryn) November 3, 2022
There is less confidence in House GOP leader Kevin McCarthy’s willingness to engage in negotiations, particularly in light of calls from his conservative wing to leverage the debt ceiling to negotiate spending reductions. Donald Trump, a former president, has often criticised Mitch McConnell for not using the debt ceiling as leverage. On Thursday, Trump suggested that Republicans “impeach” McConnell if he successfully negotiates a debt limit agreement with Democrats.
Republican strategist Doug Heye, who worked for the House GOP leadership during the Obama debt ceiling battles, said that if he were the Democrats, he would try to seek an extension during the lame duck session. In spite of the lack of a clear exit strategy, he continued, the party’s conservative base is likely to support a debt ceiling fight. If they don’t, they’ll be forced to deal with Republicans who aren’t actually interested in doing so.
Insisting that it would be up to McCarthy to hold together his disjointed caucus and persuade the public of his demands — whereas Democrats could unite behind the simple position that lifting the cap shouldn’t be up for debate — Biden advisers expressed confidence that Republicans would ultimately take the blame for any fallout from playing chicken with the debt ceiling.
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But Biden himself hasn’t arrived at that conclusion yet. While the White House has said that it thinks any package to extend the debt ceiling should be clean and excluded entitlement reforms from any arrangement to raise the ceiling, it has not made the same distinctions about discretionary spending cuts.
It is assumed, in part, that the threat of an economic catastrophe will help them with some of the difficult political work.
We are getting closer to the edge every time we continue down this path, according to Zandi. “The repercussions will be severe if they slip up even slightly.”
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