On Friday, President Biden rejected calls from some in his party to permanently eliminate the debt limit. The idea, he said, was “irresponsible.” This article assessing the utility of the debt limit first ran in September. We are republishing it in light of Biden’s comments.
At President Barack Obama’s year-end news conference in 2010, Ambinder noted that Republicans “have a significant amount of leverage over the White House,” given that the amount of federal debt was reaching the statutory ceiling.
Obama was confused. “When you say it would seem they’ll have a significant amount of leverage over the White House, what do you mean?” he asked.
“Just in the sense that they’ll say essentially we’re not going to agree to it unless the White House is able to or willing to agree to significant spending cuts across-the-board,” Ambinder replied, “that probably go deeper and further than what you’re willing to do.”
Obama dismissed the idea. “I’ll take John Boehner at his word,” he said, referring to the incoming House speaker, “that nobody, Democrat or Republican, is willing to see the full faith and credit of the United States government collapse, that that would not be a good thing to happen.”
Obama was wrong. Ambinder was right.
It’s been nearly 12 years since that interaction and Ambinder’s assessment of the political utility of the limit has gotten only more right. Over those 12 years, the once grudging-but-rote practice of elevating the limit as the debt approached turned into a series of fights over whether it should be raised at all.
The debt limit doesn’t do what a lot of people assume. It’s not a limit on spending but on paying for the spending that’s already been approved. The theory behind many debt-ceiling fights is that by capping the amount of debt that can be accrued, you’ll constrain spending by working backward.
But that’s not how it works in practice, as you can see below. Instead, Congress spends money at a deficit and the debt keeps growing higher to give it breathing room. The debt ceiling doesn’t affect the debt; the debt affects the debt ceiling.
The graph goes back to 1994, the first term of President Bill Clinton. About halfway across, you can see that 2010 news conference marked with a black line. That was the moment at which Ambinder predicted that the debt limit would be used for political blackmail. And it was. Notice the little black box at the center. The purple line indicating the amount of accrued debt becomes flat for a while; Congress didn’t raise the debt limit and so the amount of debt didn’t increase. This was early 2011, and it set a pattern for the next 11 years.
Before 2010, there are no significant periods in which the debt line goes flat, no times when the debt limit wasn’t increased to accommodate growth in debt. There are also no blank spots, periods when the debt limit was simply suspended to avoid fights over raising it. In fact, since 2010, there have been relatively few periods in which the debt ceiling was both higher than the debt and in place.
It’s useful to review all of this because of a report from Axios on Wednesday afternoon. It suggested that if Republicans retake the House in November, as is expected, they may once again use the debt limit as a point of pressure on the Biden administration.
Axios’s Alayna Treene spoke with Neil Bradley, chief policy officer for the U.S. Chamber of Commerce, who told her that “the debt limit turning into a ‘political football’ has become a ‘pattern in divided government,’ particularly with a Democratic president.”
The use of “particularly” there is what we in the writing business call an “understatement.”
Since 2010, there have been four years in which there was a Republican president. Of those four years, two overlapped with unified Republican control of Congress. So if we’re talking about divided government under a Republican president, we’re talking about 2019 and 2020.
In March 2019, a suspension of the debt limit that had passed in early 2018 on a bipartisan basis came to an end. A new limit kicked in at the amount of debt the government had accrued.
It’s useful to point out, of course, that being willing to suspend the debt limit at all largely gives the game away: If the limit is gone, there’s no putative control on debt at all. It’s a tacit acknowledgment that the purpose of the debt limit at this point isn’t actually to control the debt but to use debt as leverage.
The Treasury Department announced that it could continue to pay its bills for a few months anyway using what are referred to as “extraordinary measures.” In July, it kicked up the timeline: Congress had until early September to increase the limit or the government could default on its debts. Less than two weeks later, Congress passed a bipartisan bill again suspending the limit — with most Democrats supporting it and most Republicans opposing it.
In other words, claims that the debt limit is a tactic used by the party that controls Congress but not the White House are lacking. The only time that happened under a Republican president in the blackmail era, it was Democrats who pushed to suspend the limit, not Republicans.
The rest of the Axios article is more direct about this fact. It’s predicated on the idea that a Republican House will use the limit as leverage, part of a now-familiar tool kit for putting pressure on a Democratic president.