Debt ceiling fight holds reminders of 2011 - except maybe worse
The debt ceiling fight gripping Washington this month bears echoes of a similar clash in 2011, when a Democratic president squared off against a Republican House in a fight that dragged on for months, pushed the country to the brink of default and led to the first credit downgrade in U.S. history.
Except this time might be worse.
As President Biden and Speaker Kevin McCarthy (R-Calif.) scramble to find common ground on legislation to hike the government’s borrowing cap, they’re operating in a much tougher environment than that faced by the top negotiators a dozen years ago, according to lawmakers, economists and political observers of all stripes.
The country is more polarized, the sides have been more unyielding, a number of Republicans — including former President Trump — say they’re willing to allow a default to secure their objectives.
And McCarthy’s slim majority leaves him little room to maneuver within a conservative GOP conference that expects him to hold the line on spending cuts — or risk a challenge to his gavel.
The combination has raised the odds of an unprecedented default and rattled some veterans of past debt ceiling fights, who say this is the most precarious of them all.
“This is the first debt-ceiling situation that I felt was not going to be abated in time to protect our country,” Rep. Emanuel Cleaver (D-Mo.), a 19-year veteran of Capitol Hill, said. “I’ve never seen anything like this, so this could be one of the biggest political mistakes in the history of the republic.”
Thomas Kahn, who served as senior counsel to Democrats on the House Budget Committee for decades, including during the 2011 battle, agreed, citing three distinct reasons.
First, Republicans have shifted to the right over the last decade, and the cuts they’re demanding are much steeper than those of 2011. Second, House conservatives, fueled by Trump, appear more willing to accept default. And third, McCarthy’s delicate position leading a tiny and restive majority has made him a weaker Speaker than those of the past, one who made a lot of promises to obtain the gavel and now “depends on some of the most hard-right House Republicans to stay in power,” Kahn said.
“For all those reasons I think the situation is much more dire than 2011,” Kahn, now at American University, said Friday by phone. “And I think the chances of default are much higher.”
Yet it’s not only Republicans who have hardened their tactics this year. Biden, unlike former President Obama in 2011, has said he’s unwilling to negotiate spending cuts as part of the proposal to raise the debt ceiling, arguing that those two conversations should be divorced and follow different legislative tracks.
Philip Wallach, senior fellow at the conservative-leaning American Enterprise Institute, said that approach is well outside “the historic norm.” He suggested Biden’s position is untenable given the Republicans’ control of the House and their recent success in passing legislation that married spending cuts with a debt-limit increase.
“It’s a very novel and in some ways aggressive position that seems to be built on the hope that the Republican majority in the House is so narrow that it will just somehow disintegrate and let him have his way,” Wallach said. “That seemed more likely a month ago than it does today.”
Still, Wallach emphasized that McCarthy is in no easy spot, squeezed between a default on one side and conservative pressure on the other.
“This is the first real test of McCarthy’s mettle as Speaker,” Wallach said. “We just don’t know whether he’s actually the kind of person who can put together and sell a deal to a lot of his members. I think there’s a lot more skepticism about that than with John Boehner.”
If the cast of characters is different this year, the contours of the debate mirror those of a dozen years ago.
The 2011 saga matched Obama against then-Speaker John Boehner (R-Ohio), who had taken the gavel the same year on the wings of a “Tea Party” movement that demanded deficit reduction and rejected any increase in the government’s borrowing cap without sharp cuts in federal spending. The two powerbrokers spent months working privately on a compromise, but the talks fell apart after a bipartisan group of senators intervened with a plan of their own, including tax hikes more significant than Boehner and his conservative conference were willing to accept.
“[A]dding more revenue … would have made it impossible to get enough Republicans on board,” Boehner wrote in his 2021 memoir, “On the House.” “So the deal was basically dead.”
A default was averted at the 11th hour by the passage of the bipartisan Budget Control Act (BCA), which lifted the debt ceiling and created a bipartisan commission, known as the Supercommittee, charged with drafting recommendations to curb long-term deficit spending.
But the close call didn’t do much to instill market confidence, prompting Standard & Poor’s to downgrade the United States’s triple-A credit rating for the first time in the country’s history. And the Supercommittee ultimately proved unsuccessful, leading some political experts to predict that a similar escape hatch likely won’t fly with conservatives this time around.
“What usually happens in cases like this is that the House Republicans use the imperative of raising the debt ceiling as leverage to cut a budget deal with the White House – and that may yet happen,” David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, said in an email. “But it doesn’t look like House Republicans will settle for a ‘special committee’ to come up with deficit-reduction measures, the resolution of the 2011 standoff.”
The volatile political climate means there’s a “higher chance than usual that Congress fails to raise the debt ceiling before the Treasury runs out of cash,” Wessel added. That’s “not the most likely outcome,” he continued, “but way too big a possibility.”
Amid the standoff, Biden, McCarthy and other congressional leaders are insisting they’ll work out a deal in time to prevent a default.
The president hosted the top four congressional leaders at the White House last Tuesday to launch the talks in earnest. And although a second meeting scheduled for Friday was called off, leadership staffers have continued the negotiations, and voices on both sides said the cancellation was no indication that progress had stalled.
“There are negotiations happening for real and I think that’s very good news for our country,” Rep. Dusty Johnson (R-S.D.) told reporters.
Still, the Treasury Department has warned that the government could exhaust the ability to pay all of its obligations as early as June 1, leaving a short window for the parties to reach a compromise. And that’s led to plenty of speculation that the sides will have to lean on some alternative strategy for preventing a default.
Some lawmakers are hoping Biden will invoke the 14th Amendment and simply continue to pay down all the country’s debts, despite the statutory cap — an untested and highly disputed legal strategy that Biden nonetheless says he’s eyeing.
“You can’t leave this up to reckless abandon,” Rep. John Larson (D-Conn.) said. “If he has to, he’s got to utilize the 14th Amendment.”
Others, like Rep. Jim Himes (D-Conn.), have said it will require a market crash before House Republicans are willing to move a debt-limit bill through the lower chamber.
Wessel, of Brookings, noted the possibility that Senate Minority Leader Mitch McConnell (R-Ky.), who has a long history negotiating budget compromises with Biden, will step off of the sidelines and broker a deal between McCarthy and the president.
And a number of voices think the most likely scenario is that Congress will move a short-term debt limit extension that buys negotiators more time and, perhaps, harmonizes the default deadline with that for funding the government.
“That’s more likely than not what would happen, but I would not foreclose the possibility of a default of a couple days,” said Kahn, of American University.
“I hate to say that, and I pray that doesn’t happen,” he added. “But I think it is certainly a very real possibility.”
Emily Brooks contributed reporting.
Source: The Hill
