Sometime this summer, Congress will have to increase the debt limit, the law that caps the amount of debt that the Treasury Department can issue to pay the country’s already accrued bills. If it does not increase the debt ceiling, the government would be unable to meet all of its obligations and would risk a debt default. That in turn could prompt a global financial crisis and put the dollar’s status as the world’s reserve currency in jeopardy. It would be unpleasant.
Fortunately, writing legislation to increase the debt limit is not difficult. It requires a one-sentence bill that changes the current limit number to a bigger number.
Unfortunately, there is no indication that Congress is capable of getting this done.
At issue is the House Republican majority’s insistence on sharp spending cuts in exchange for raising the debt limit, while the White House and congressional Democrats are insisting on a “clean” debt limit increase and are refusing to negotiate cuts. This is the one issue the divided Congress has known all year that it would have to find a way to get done. A few months in, zero progress has been made.
“There’s no back-channel conversations going on,” North Carolina Rep. Patrick McHenry, the chairman of the Financial Services Committee and one of the House GOP’s best vote-counters, told Punchbowl News this week. “I would be aware of those. There’s no staff conversation going on. I would be aware of those. So I’ve never been more pessimistic about where we stand with the debt ceiling.”
“I don’t even see a path,” he said.
There has, at least, been some movement on the House Republican side this week to specify its demands. After months of Democrats badgering House Republicans to state their cuts—in the hopes of attacking them over it—Speaker Kevin McCarthy wrote a letter to President Biden yesterday outlining a few requests.
Cuts to Medicare, Social Security, and the defense budget are off the table. McCarthy would, however, like to cut non-defense spending to “pre-inflationary” levels. That would mean a roughly 8 percent, or $130 billion, cut to domestic spending. That’s a non-starter for Democrats—and likely some of McCarthy’s own Republicans, too. McCarthy also listed “reclaiming unspent COVID funds,” “strengthening work requirements” for beneficiaries of federal benefit programs, and certain unnamed changes to energy or border security policy.
“Mr. President, simply put: you are on the clock,” Speaker Tough Guy concluded.
Biden released his response a few hours later calling on House Republicans to release a full budget blueprint, and insisted that talks about spending cuts be divorced from House Republicans’ separate obligation to raise the debt limit.
Cool letter exchange, guys.
There is one intriguing possibility, though, that’s popped up in the last few days.
McCarthy, in his letter, suggested “measures to lower energy costs” and “make America energy independent.” Behind the scenes, some Republicans are floating permitting reform as a possibility. If done correctly, that could have benefits for both sides, as Democrats could use permitting reform to more quickly build up the clean-energy investments passed in last year’s Inflation Reduction Act, as well as other pieces of legislation passed in the last Congress. Writing such a delicate piece of legislation would be difficult. A permitting reform push late last year led by West Virginia Sen. Joe Manchin crashed and burned with opposition from both sides. But hey! Anyone is welcome to propose a better idea whenever they want!
Democrats seem to feel pretty confident that, in the end, the usual will happen: Republican donors and corporate executives will threaten Republican politicians near the deadline, and they will agree to a clean increase. Perhaps. But this current House Republican majority does seem willing to push harder than any House Republican majority before them. We may reach a situation where the debt limit deadline is breached for a couple of days to create the necessary level of market panic to get the job done.