Republicans refuse to raise debt limit after twice raising it under Trump, setting up potential economic calamity
It’s that time again: Time to raise the limit on the amount of money the U.S. government is authorized to borrow to fund existing obligations (i.e. it is not new spending). The previous two-year suspension of the debt ceiling expired at the end of July, forcing the Treasury to shift around funds to temporarily keep the government up and running. It is estimated that this short-term solution will only last until October or November, putting Congress under the gun to raise the limit in the next two months, in the midst of a pandemic and infrastructure push.
There’s one massive problem, however. Raising the debt limit is subject to a 60-vote threshold and Republicans are not motivated to assist the majority in preventing the U.S. from defaulting. Such a strategy is fairly new; for decades, increasing the debt ceiling was considered routine and necessary by both parties. It wasn’t until the creation of the Tea Party that the debt limit became a regularly contentious issue on the right.
Where does the U.S. borrow money from? The national debt is “owed” to ourselves, for the most part. $22 trillion is held by the public. Roughly $6 trillion is owed to another part of the federal government, such as Social Security surplus and the Federal Reserve.
What happens if the limit is not raised? The Treasury enacts “extraordinary measures” to continue meeting federal obligations, as long as new debt is not created. Extraordinary measures usually consist of suspending investments in federal funds, like individual retirement funds of federal employees, the Postal Benefits Fund, or the Exchange Stabilization Fund (PDF).
The history of debt ceiling increases:
In 2011, the newly-empowered House Republicans demanded that President Obama reduce the deficit in exchange for their votes increasing the debt ceiling. Just two days before the Treasury’s extraordinary measures were estimated to fall short, Speaker John Boehner (R) and Majority Leader Harry Reid (D) reached a deal to raise the debt ceiling by $1.2 trillion in return for cutting an equal amount from federal spending. (Wiki)
As a result of the 2011 Republicans holding the debt limit hostage, the world’s leading credit rating agency, Standard & Poor’s, downgraded America’s perfect rating for the first time in history.
John Chambers, chairman of S&P’s sovereign ratings committee, told CNN that the US could have averted a downgrade if it had resolved its congressional stalemate earlier.
“The first thing it could have done is raise the debt ceiling in a timely manner so the debate would have been avoided to begin with,” he said.
In 2013, Republican lawmakers refused to raise the debt ceiling unless Obama defunded the Affordable Care Act (Obamacare). As the crisis progressed, House Republicans instituted new demands, including privatizing Medicare and/or Social Security, cutting food stamps, means testing Social Security, and raising the age of retirement. The government simultaneously shut down due to budget disagreements, tanking the Republican party’s approval numbers. With one day to spare, the Republicans backed down. (Wiki)
Unsurprisingly, once Republican President Donald Trump took office, the majority of Republican opposition to raising the debt ceiling dissipated.
On Thursday, Senate Minority Leader Mitch McConnell (R-KY) pledged that his party will not work with Democrats to raise the debt limit:
“Democrats are about to tell Republicans to go take a hike, and start keying up trillion more dollars in borrowing and spending,” McConnell said in Senate floor remarks. “They want Republicans to give them political cover for the partisan debt bomb that they’ll go right on to detonate with zero input from my colleagues.”
“They won’t get our help,” the Kentucky Republican continued. “They won’t get our help with the debt limit increase that recklessly, that these reckless plans will require. I could not be more clear. They have the ability. They control the White House, they control the House, they control the Senate. They can raise the debt ceiling and if it’s raised, they will do it.”
Sen. Rick Scott (R-FL):
Scott is pushing the GOP to insist on dollar-for-dollar spending cuts as part of a debt ceiling increase ahead of a July 31 deadline…. ”I think Republicans agree that we have too much debt and that we have to figure out how to live within our means.”
Majority Leader Chuck Schumer (D-NY) pointed out that Republicans created the debt from the past few years:
“This debt is Trump debt,” Schumer added. “It’s Covid debt. Democrats joined three times during the Trump administration to do the responsible thing and the bottom line is that Leader McConnell should not be playing political games with the full faith and credit of the United States. Americans pay their debts.”
President Joe Biden echoed his sentiment:
“You know, for the last four years they’ve just extended the debt limit. The reason for the significant debt is because of their, their debt, their tax cut,” Biden told reporters in Kentucky…
The only feasible way to raise the debt ceiling without Republican support is through the upcoming budget reconciliation package, which only requires 51 votes to pass the Senate. It is not clear, though, if the process can progress fast enough to meet the Treasury’s deadline.
Furthermore, Democrats reportedly aren’t sure they want to shoulder the political cost of raising the debt ceiling without a single Republican vote. The general public tends to oppose debt but enjoy the programs that such debt ungirds. Therefore, the party may want to avoid the optics of approving a debt ceiling hike, despite the necessity of such an act.
Another part of this for Democrats, an aide told Washington Post], is that moderates are reluctant to include a debt limit hike in reconciliation because for technical reasons that requires specifying a particular number for that ceiling. By contrast, doing it in a spending bill allows Congress to just temporarily suspend the debt limit until a future date.
Just because Republicans often cry about the debt and deficit when a Democratic president is in office, let’s revisit the history of budget deficits…
Fact check: Over the past 40 years, Republican presidents have left office with a larger deficit while Democratic presidents have reduced the deficit during their terms.
Ronald Reagan: $78.9 billion deficit at start of presidency. $152.6 billion at the end of it.
George H.W. Bush: $255 billion deficit at the end of Bush’s term. A $102.4 billion deficit increase from his predecessor.
Bill Clinton: The only president in recent time to leave office with a surplus. Took the $255 billion deficit and turned it into a $128.2 billion surplus.
George W. Bush: Took the surplus and left office with a deficit of $1.42 trillion.
Barack Obama: Left office with a deficit of $584.6 billion, half of the deficit he inherited.
Donald Trump: At the end of fiscal year 2020 (which ended Oct. 2020), the deficit was $3.1 trillion, nearly 6 times the amount he started with. Even before the pandemic struck, Trump created nearly $5 trillion of new debt signed into law through tax cuts and spending increases.