Watch Your Head on the Coming Debt Ceiling
It’s that time of the DC season when debt ceiling politics reemerges. While the political theatrics will be hammy, the risk of a US government default remains low. In the end, bipartisan “Rescue Committees” could be the new Simpson-Bowles.
Senate Minority Leader Mitch McConnell (R-KY) made news yesterday when he said Republicans are going to pass the buck when it comes to voting to raise or suspend the debt ceiling. “I can’t imagine a single Republican in this environment that we’re in now — this free-for-all for taxes and spending — to vote to raise the debt limit,” McConnell said to Punchbowl News. “I think the answer is [Democrats] need to put it in the reconciliation bill.” On the Senate floor yesterday, Senate Majority Leader Chuck Schumer (D-NY) said McConnell’s comments were “shameless, cynical, and totally political.”
After McConnell, Schumer, and two-thirds of the Senate voted to suspend the debt ceiling for two years as part of a broader budget caps deal back in 2019, the debt ceiling will be reinstated at the end of this month. The Congressional Budget Office (CBO) today is expected to release an estimated “X-date” when extraordinary measures runs out for the Treasury to pay its obligations.
As an aside, Congress holds the power of the purse to tax and spend for the federal government. In 78 of the last 90 years, spending going out has been greater than the taxes coming in, thereby creating a federal budget deficit for the year. To bridge the gap between outlays and revenue, Congress delegated to the Treasury the authority to issue debt. However, the statutory debt limit gives Congress the final say in how much debt the Treasury can issue.
So what’s going to happen to the full faith and credit of the United States?
For McConnell, this is a rational move on his part. But it’s also just an opening move. Debt ceiling politics hasn’t really paid off in the past. The Republicans first held the US debt ceiling hostage in 2011, thanks to the Tea Party wave that brought them into the House majority. What resulted was a budget caps deal. However, in the next election cycle in 2012, Republicans lost seats in the House and Senate and did not win the presidency. Just ask how that vote against suspending the debt ceiling went in 2019 a year before the election for then-Senator Cory Gardner (R-CO) or then-Reps. Joe Cunningham (D-SC) and Collin Peterson (D-MN). Yet, that Tea Party DNA from a decade ago is still very much a part of many Republicans in the rank-and-file who came to power during that moment. Even with a lower appetite for austerity politics among the activist base, McConnell has zero interest in fully embracing an issue that divides his own conference and would be more than happy to let Democrats take ownership of the issue, allowing for a cleaner 2022 midterm messaging campaign against Democratic tax and spending.
Then will Democrats include action on the debt ceiling in reconciliation?
Democrats have the option of doing so, as reconciliation allows for action on spending, revenue, and the debt ceiling. However, it’s unclear whether there has to be a vote on an actual dollar amount to raise the debt ceiling rather than a suspension of it. The former is seen as being more politically treacherous for moderates, even though there has been scant evidence of political blowback on debt ceiling votes in the past. What can be done logistically will be a decision for the Senate parliamentarian to decide. Another important factor is the X-date. It’s likely Democrats don’t finish a reconciliation bill until Q4 of this year. That could make a debt ceiling vote as part of the broader reconciliation bill a dicey proposition. According to reconciliation rules, Democrats could hold a separate vote on just the debt ceiling that’s separate from spending and revenue measures. If Democrats pass an FY22 budget resolution before the August recess, a debt ceiling reconciliation vote could conceivably occur in August or after Congress returns from the August recess in September. It would require a separate vote-a-rama, although the political challenges of such a marathon vote may be limited by what’s germane under a reconciliation bill for just the debt ceiling.
The preference is to have a bipartisan vote, but Democratic leadership has not come to a final decision of whether to include a vote on the debt ceiling under reconciliation. If Democrats decide to bypass reconciliation and force a bipartisan vote, it then becomes a game of political chicken. Democrats may seek to attach a debt ceiling vote to a vote on something like a bipartisan infrastructure bill or FY22 appropriations. In the end, it’s unlikely McConnell is really going to hold the full faith and credit of the United States hostage over a debt ceiling vote.
What’s the off-ramp for sufficient Republican support?
Senator Lindsey Graham (R-SC) yesterday said he could find his way to voting to raise the debt ceiling if he gets a Social Security and Medicare trust fund commission and/or other reforms. One option could be a promise to consider or pass the TRUST Act. Bipartisan and bicameral legislation introduced by Senator Mitt Romney (R-UT), the TRUST Act would create bipartisan “Rescue Committees” for “endangered trust funds” (e.g. Highway Trust Fund, Medicare Part A, and both Social Security trust funds) that would look to craft bipartisan legislation to improve the solvency of these programs. Of course, the odds of such Rescue Committees putting together a bill that would actually garner 60+ votes in the Senate and a majority in the House are slim to none. But punting legislative action to “blue ribbon” and “bipartisan” committees is an age-old political workaround. It’s one potential face-saving out for Senate Republicans to support a vote on the debt ceiling.