The immediate crisis of the federal debt ceiling may have been temporarily resolved by the time this column is published. But hang onto it anyway. This habit of Republican hostage-taking has been used several times since Speaker Newt Gingrich radicalized the party in the mid-1990s, and it will return.
The debt limit has been around since World War I — a technicality — and America is one of the few nations to have such a statute. Since 1960, Congress has raised or revised it 78 times, in 49 instances under Republican presidents and another 29 under Democratic presidents.
This was usually done with bipartisan votes, as happened under President Donald Trump (the national debt, currently around $29 trillion, rose by $7.8 trillion during his term, much of this before the pandemic hit).
But the limit is widely misunderstood.
It doesn’t control or limit spending. It only accounts for the appropriations and taxes that Congress has already passed and seen signed into law. The writer James Fallows likens it to how “the check you get at the end of a restaurant meal reflects what you have ordered and eaten.”
(The short-term spending bill that Congress passed Thursday kicks the can of budget-writing down the road. It doesn’t raise or suspend the debt ceiling.)
However, the ceiling is not a benign slip of paper.
Treasury Secretary Janet Yellen, a former chair of the Federal Reserve, told lawmakers on Tuesday the nation would face “catastrophic” consequences if they didn’t raise or suspend the debt ceiling.
The Treasury, which has been using emergency measures to squirrel away cash since August, would lack the funds to pay all the government’s bills by Oct. 18. After that, the government would be unable to pay its bills, including such obligations as Social Security checks and soldiers’ pay, as Yellen explained.
A default on Treasury debt would follow, the first in American history. A recession would be inevitable, sandbagging this fragile recovery at a time when the pandemic is still a deadly challenge.
Mark Zandi of Moody’s Analytics estimates that a prolonged impasse over the debt ceiling could cost as many as 6 million jobs, vaporize $15 trillion in household wealth and raise the unemployment rate to 9%.
Considering that China’s property market is in trouble and the country is facing an energy crunch, the ripples of an American contraction would be worldwide.
Default would also mean the end of the dollar as the world’s reserve currency and Treasury debt as the chief safe-haven, a standing that has allowed the United States to have unlimited borrowing power.
I don’t think most Republicans want such disastrous outcomes. But they do know from previous experience in the Clinton and Obama years that using the debt ceiling as a weapon — hostage-taking to extract concessions — can be politically advantageous.
As Sen. Mitch. McConnell, the GOP leader, tweeted for the base’s consumption: “There is no chance the Republican Conference will go out of our way to help Democrats conserve their time and energy so they can resume ramming through partisan socialism as fast as possible.” And his senators filibustered against raising the ceiling.
It’s a risky gambit, however. As The New Yorker’s John Cassidy put it, “Like many other parts of the U.S. political system, the federal government’s budget process no longer operates on rational lines.”
Other options are available to the Democrats, such as passing the measure with a simple majority vote in what’s called the reconciliation process — or even minting a trillion-dollar coin. Easier said than done: Contrarian Sens. Joe Manchin of West Virginia and Kyrsten Sinema of Arizona likely wouldn’t vote with fellow Democrats who hold a narrow majority.
Republicans have become a very disciplined party of the right. Democrats remain a mass party with liberals, centrists and conservatives. It makes unity difficult. For example, in the House, Seattle’s Rep. Pramila Jayapal leads a progressive caucus that won’t support President Biden’s signature infrastructure bill unless more is done to expand the social safety net and other progressive priorities.
The best temporary patch is a move Wednesday by House Democrats to separate a spending bill from the debt-ceiling limit. That would avert this week’s deadline (and it’s not a done deal; this is a fast-changing story). But it offers no guarantee of preventing the debt ceiling from returning soon.
It’s a risky, banana-republic way to run the world’s largest economy.
But this is where political polarization that’s worse than any time since the eve of the Civil War has landed us. Joe Biden received the greatest number of votes for president in American history in 2020. But Donald Trump won the second-greatest number.
Even without vote suppression measures and gerrymandering, Republicans have other built-in advantages. This especially plays out in the Senate. (Wyoming, with two U.S. senators, has 577,000 people fewer than Seattle. California has nearly 40 million residents — and two U.S. senators.)
As a result, Republican policies have dominated the economy for decades: tax cuts especially for the rich, deregulation, union busting and failure to address the costs of climate change. Now the Supreme Court is further to the right than any time in nearly a century.
In 2010, McConnell said his priority was to ensure that Barack Obama was a one-term president. No doubt he has the same goal for Biden, who is pushing the most ambitious progressive agenda in decades.
Right now, that hopeful agenda is in trouble. Running up to the cliff of default is only one symptom.