US Debt Forum Articles

White House rules out concessions over debt ceiling while GOP refuses to help avert crisis

Republicans raised the debt ceiling with the Trump administration but say Democrats now own the issue.

The White House is in a bind over the potential breach of the federal debt ceiling as GOP lawmakers refuse to help Democrats avert a national financial catastrophe, leaving the administration with few easy answers as time runs out.

Senate Minority Leader Mitch McConnell (R-Ky.) has insisted Republicans will not cooperate with pleas from the Biden administration to increase or suspend the debt ceiling — the legal limit for what the federal government can borrow to avoid defaulting on its obligations.

Meanwhile, the White House has ruled out offering policy concessions to Republican lawmakers to lure GOP votes, according to three senior administration officials familiar with the matter. McConnell has not communicated any requests to the administration of what he wants in exchange for support for the suspension, the people said. Even if McConnell does outline a proposal, the White House has no intention of rewarding the GOP for trying to use the debt ceiling as leverage in other negotiations, the officials said, with one describing the position as “a matter of principle.”

Instead, the Democrats and Republicans have spent recent days publicly bludgeoning each other over the debt ceiling, yet another sign that there are no negotiations to resolve the impasse. Republicans have argued that Democrats have the votes to increase the debt limit on their own and should do so given that Democrats are pushing trillions of dollars in new spending priorities.

Democrats have rejected that approach because they do not believe they should be solely responsible for voting to prevent a national default and because the current national debt was created by both parties, although a top House Democrat on Sunday acknowledged that his party might have to act alone as a measure of last resort.

The stalemate has hardened while the Treasury Department has warned that it will not have enough money to pay all of the U.S. government’s bills sometime in October if the debt ceiling is not raised. Though the Biden administration has not outlined the chain of events that would follow such an event, financial experts have predicted that the government would be forced to slash all spending, perhaps by up to 40 percent, cutting benefits and a range of programs.

GOP lawmakers during the Trump administration voted three times to suspend the debt ceiling. Federal policymakers added trillions of dollars to the federal debt during Trump’s presidency — significantly more than has been added by Biden — with the support of Republican leaders. The $28 trillion national debt rose by roughly $7.8 trillion during the Trump administration.

The absence of policy negotiations over the debt ceiling leaves unresolved how the nation will resolve the potential financial calamity as the GOP digs in on the issue. The Treasury Department in August began “extraordinary measures” to conserve cash, after the most recent debt ceiling suspension lapsed in August. But Treasury is on the brink of extinguishing almost all of its options.

Inside the White House, there is a deepening sense of anger over McConnell’s refusal to help Democrats raise the debt ceiling given the potential financial calamity that would ensue. White House officials also believe such a stalemate creates a distraction from other urgent economic problems already facing the country, the senior administration officials said. But there is a similarly strong unwillingness to establish a precedent that rewards policymakers for threatening to wreck America’s fiscal health, the officials said.

“The White House needs to both ensure the United States does not default and also maintain the norm that the debt limit is not an acceptable hostage,” said Jason Furman, who served as a senior economist during the Obama administration. Republicans argue Democrats should approve the debt ceiling hike through the budget process they are using to approve Biden’s $3.5 trillion economic relief package with only 50 votes.

McConnell has emphasized he agrees the debt ceiling needs to be raised but maintains that Democrats should be wholly responsible for doing so because they control Congress and the White House. McConnell has argued that because Democrats are pursuing an economic plan without GOP votes, they should also lift the debt ceiling on their own.

In a statement, a senior GOP aide also said that the debt ceiling hike was about future, not past, spending. However, the debt ceiling would have to be raised regardless of whether Biden’s economic package is approved. The GOP aide said that the matter was about future spending because raising the debt limit to a new number would authorize additional spending to a new level.

“The country must never default. The debt ceiling will need to be raised. But who does that depends on who the American people elect,” McConnell told Punchbowl News last week. He added, “The Democratic leaders have every tool and procedure they need to handle the debt limit on a partisan basis, just like they are choosing to handle everything else.”

Donald Schneider, who served as an aide to Republicans on the House Ways and Means Committee, added, “Republicans have a point here: If Democrats are the party of good governance, they can just go ahead and do this on their own.”

Democrats have suggested pairing a vote on the debt ceiling with disaster relief funding and legislation to avert a government shutdown. Congress also has until the end of the month to fund the government and avoid a shutdown. House Speaker Nancy Pelosi (D-Calif.) said Sunday that Democrats would approve the debt ceiling hike on a “bipartisan basis” as it has in the past. The White House is also not considering more heterodox ideas, such as minting a “trillion-dollar coin” to bypass Congress over the debt ceiling, the people said. That position was first reported by Politico.

Democrats say it makes little sense for them to bear sole responsibility for voting to approve a debt ceiling increase that was required by bipartisan legislation and other measures supported by Republicans. They are particularly wary of repeating the Obama administration’s decision in 2011 to negotiate with the GOP over raising the debt ceiling, an agreement that paved the way for automatic spending cuts liberals have rued for a decade. That experience has hardened the Biden administration’s opposition to negotiating over the debt ceiling.

“The GOP is trying to extort the full faith and credit of the U.S., and the administration is right in their unwillingness to negotiate,” said Jim Manley, who served as an aide to former Senate majority leader Harry Reid (D-Nev.).

The White House says the GOP’s position is nakedly political and flies in the face of the party’s prior actions and statements. McConnell himself voted to increase or suspend the debt ceiling 32 times in the past, including three times under Trump, according to the administration. A spokesman for McConnell did not contest the figure. Roughly 97 percent of the current U.S. cumulative debt was accrued before Biden took office.

Republicans under Trump approved a tax cut in 2017 that added more than $2 trillion to the federal debt, as well as coronavirus aid packages that cost more than $3 trillion. McConnell under Trump also approved additional increases in spending on domestic programs and the military budget, as concerns about the deficit among GOP leaders appeared to evaporate after emerging as a major flash point of the Obama years.

Biden has added less to the national debt so far. Under Biden, Democrats in Congress approved a $1.9 trillion coronavirus relief package in March that was not paid for. The Senate on a bipartisan basis also approved an approximately $550 billion infrastructure bill that has not yet been signed into law, but will add roughly $400 billion to the deficit, according to nonpartisan budget experts.

The GOP’s objections to cooperating with the debt ceiling hike have focused on Biden’s plan to spend $3.5 trillion over 10 years on a wide-ranging economic package, including climate-related and social safety net funding. But it remains to be seen how much of the cost of the package will be added to the national debt. Democrats have said most or all of that legislation will be paid for with new taxes on the wealthy and corporations. A House Democratic committee earlier this month circulated a plan that included more than $2 trillion in new revenue to pay for the measure.

Brian Riedl, a former aide to Sen. Rob Portman (R-Ohio), said Democrats have historically only voted for debt ceiling hikes when Congress and the White House are both controlled by Republicans if they are given policy concessions. Riedl said Republicans should come forward with policy ideas in exchange for their support to raise the debt limit. But that may do little to advance negotiations, given White House opposition to bargaining over the matter.

“Every Republican office I talk to agrees the debt limit has to be raised. The real question is what policy concessions will they require to provide the necessary vote to raise the debt limit,” Riedl said. “They’ve taken a hostage, but they have not left a ransom note yet.”

Washington Post

September 20, 2021

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