The Washington PostDemocracy Dies in Darkness

GOP debt ceiling threats set to revive brinkmanship with White House

President Biden says it would be ‘irresponsible’ to abolish the debt limit, although his treasury secretary and close allies want it eliminated

House Minority Leader Kevin McCarthy (R-Calif.) in his office in September. McCarthy and other senior Republicans have suggested using the federal debt limit to force President Biden to negotiate over government spending if they take control of one or both chambers of Congress. (Jabin Botsford/The Washington Post)

Top Republican lawmakers say they’ll try to use the federal debt limit to force President Biden to bargain if they win control of Congress, threatening to revive a form of high-stakes brinkmanship that could push the United States to default on its debt and posing major new dilemmas for the White House next year.

In separate interviews this month, Reps. Kevin McCarthy (Calif.), Jim Banks (Ind.), Adrian Smith (Neb.), and Jason T. Smith (Mo.) — all widely seen as likely leaders in a Republican-controlled House — said they plan to demand various changes to federal law in exchange for lifting the “debt ceiling.” The debt limit will need to be raised sometime next year to allow the government to borrow money to pay for spending Congress and the White House have already agreed on.

Failing to raise the limit would lead to a catastrophic default that would rattle global financial markets and could risk throwing the U.S. into a recession, economists say. One study last year, before Congress last raised the limit, estimated that breaching the ceiling could wipe out $15 trillion in wealth and cost as many as 6 million jobs.

The total national debt is $31 trillion. Last December, Congress raised the limit by $2.5 trillion, and current estimates suggest the debt could begin to approach that ceiling during the winter of 2023. Lawmakers have raised the limit 78 times since 1960, according to the Treasury Department.

“The American people expect Congress to use every tool at its disposal to combat rising prices, to strengthen our economy, to secure our border, to bring down the cost of energy, to fix our supply chains, and to right size the federal government,” Smith, a top contender to lead the House Ways and Means Committee, said in a statement to The Washington Post. “The debt ceiling absolutely is one of those tools.”

Senior Biden aides privately explored whether payments could continue even if U.S. breached debt ceiling

The posture could force many senior Biden aides — and the president himself — to relive the battles they waged with congressional Republicans during the Obama administration, again putting a Democratic administration in the difficult position of having to pick between jeopardizing the country’s credit and giving in to conservative demands to cut government spending. In a speech at the Democratic National Committee on Monday, Biden slammed Republican officials who want to use the debt ceiling to force cuts to Social Security and Medicare, accusing them of threatening to “crash the economy” and refusing to give into those demands.

“There’s nothing — nothing — that will create more chaos, more inflation, more damage to the American economy than this. … Republicans are determined to hold the economy hostage,” Biden said. “It’s outrageous. … It’s irresponsible.”

But Biden on Friday also ruled out backing the efforts of some Democratic lawmakers to abolish the debt limit before the next Congress, setting the stage for a possible showdown with the global economy at stake if Republicans take over the House or Senate after the elections in two weeks — surprising some of his own aides, according to two people who have been in communication with senior administration officials and spoke on the condition of anonymity to reflect private conversations.

While some Republicans do favor brinkmanship over Medicare and Social Security — the two popular federal entitlement programs for seniors — some aides and analysts think the GOP may be more likely to demand changes to other Democratic priorities.

GOP leaders have discussed using the debt limit and government shutdown fights to press for cuts to clean energy spending — which many experts view as necessary to slow climate change — approved as part of the Inflation Reduction Act, Biden’s signature economic legislation, according to several conservative policy analysts, including former Trump adviser Stephen Moore and anti-tax crusader Grover Norquist. Republicans are also eyeing demands for the administration to slow or reverse its plans to ramp up Internal Revenue Service enforcement of the nation’s tax laws, although the GOP planning is preliminary and expected to evolve.

How the Inflation Reduction Act might affect you — and change the U.S.

Congress is expected to have to authorize an increase in the debt ceiling sometime in the winter, with the precise date uncertain as of now — it would depend on when the national debt approaches the limit. First, lawmakers must fund the government by Dec. 16 or face a broad federal shutdown.

McCarthy, expected to become House speaker if Republicans win that chamber, left open the possibility of pushing for Medicare and Social Security changes when asked by Punchbowl News this month, but then later stressed to CNBC that he had never mentioned those programs.

Former president Donald Trump’s attacks on fellow Republicans have cemented the GOP’s determination to use the debt limit to demand concessions, as Trump has repeatedly harangued Senate GOP leader Mitch McConnell (Ky.) for giving in on the issue in negotiations with congressional Democrats in the past. Congress raised the debt limit three times when Trump was president and has raised it once so far under Biden.

“There’s a genuine desire and strategic imperative to get something out of this — that may be stupid and may be reckless, but they have to play this game out,” said one GOP strategist, who spoke on the condition of anonymity to frankly describe dynamics among Republican lawmakers. “If you don’t try it, you’ll just get beat up on by figures on the right, including the former president — who will say you’re weak and stupid and you gave them this vulnerable thing for nothing.”

U.S. default this fall would cost 6 million jobs, wipe out $15 trillion in wealth, study says

The debt limit fight has already emerged as a key litmus test for GOP leadership positions, such as the open contest to become the next House whip, where Banks and Reps. Tom Emmer (R-Minn.) and Drew Ferguson (R-Ga.) are in the running.

Members of the conservative House Freedom Caucus also discussed using the debt limit and the December deadline to fund the government for the rest of the fiscal year — if that gets punted to early 2023 — as reasons to demand spending cuts even before McCarthy announced his intentions to do so. The freedom caucus, which represents roughly 30 of the staunchest House Republican members, began to signal its intentions last month as they pressured GOP leadership to tell Republicans not to vote to fund the government through December unless significant spending cuts were made.

“No one wants to default on our debt. Nor should we, but we should, as part of the process say, ‘OK, what are we spending our money on, and how are we going to balance it?’” Rep. Warren Davidson (R-Ohio), a member of the freedom caucus, said in an interview.

Rep. Bob Good (R-Va.) said that a GOP majority will have a mandate from voters to use every deadline throughout the year to cut spending and address what he considers to be the greatest threats to the country — such as rising prices, immigration, education, and energy independence.

“We ought to use the budget process in January to force the change that the American people, I believe, are going to vote for on Nov. 8,” he said in an interview before the House adjourned last month to campaign.

The sentiment appears to be widely shared among Republicans more broadly. “The debt ceiling is an important tool for addressing debt and deficit,” Adrian Smith, a top Republican on the Ways and Means Committee, told The Post. “After two years of irresponsible spending by Democrats driving historic inflation, American families can’t afford for us to not have a serious debate about government spending.”

The spending clashes could put major new strains on Democratic lawmakers if the party still controls one chamber of Congress, and the debt ceiling has already led to divisions at the senior levels of the Biden administration.

Treasury Secretary Janet L. Yellen, for instance, called last year for the debt ceiling to be abolished altogether — a position shared by many economists who see it as an enormous danger without any upside. On Friday, however, Biden told reporters it would be “irresponsible” to repeal the debt limit. Sen. Bernie Sanders (I-Vt.), the chairman of the Senate Budget Committee, also told CNN on Sunday that he did not believe the debt limit should be abolished.

Some Democrats have advanced legislation to effectively eliminate the debt ceiling by raising it to an impossibly high number, such as googolplex. Using the budget process known as reconciliation would make that move possible with only Democratic votes, bypassing a GOP filibuster in the Senate, but Biden’s opposition appears to at least for now have put an end to those efforts, which would likely face opposition from centrist Democrats.

“Actively worsening inflation while raising energy and health care costs — all for a tax giveaway to big corporations and the rich — is the definition of selling out middle class families,” White House spokesman Andrew Bates said in a statement. “But threatening to cause an unprecedented recession in order to do that would be an absolutely economic nightmare for the country.”

Biden played a lead role in the Obama administration negotiating debt ceiling standoffs with congressional Republicans directly — and occasionally infuriating his Democratic allies with concessions.

Some economists close to the White House are urging Biden to defuse the debt ceiling bomb now, even if that requires Democrats to take a politically painful vote to raise the debt limit beyond the next Congress.

“Kevin McCarthy with a small margin in the House may have a harder time than any of his predecessors doing something about the debt limit,” said Jason Furman, who served as a senior economist during the Obama administration. “Democrats should use reconciliation to raise the debt limit by quadrillions of dollars, or enough to get through the next few years. Whatever pain there is now will be forgotten in the next two years.”

But Norquist urged Republicans to take a hard line again.

“You will likely end up to something very similar as to Obama: You want a $2 trillion debt ceiling increase, then we need $2 trillion in deficit reduction from your previous plans,” he said. Norquist said it’s important that, as was the case under Obama, any deficit reduction comes in the form of reduced spending, not higher taxes. “That’s exactly what we got. And you can’t say it’s unprecedented, because we did it to Obama last time, and he totally caved, and we won.”

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