- Some Democrats want to kill the debt ceiling as the limit nears a critical mid-October deadline.
- Republicans are starkly opposed to raising it, leaving Democrats to prevent a government default on their own.
- Interest in ending the “silly rule” is growing among Democrats and even some Republicans, Rep. Bill Foster told Insider.
- See more stories on Insider’s business page.
Almost every year, Congress fights over a “silly rule that we make up for ourselves,” Rep. Bill Foster of Illinois told Insider. “Everyone is completely fatigued with this issue and those who have been in Congress a long time are probably more fatigued than anyone else.”
He’s talking about the debt ceiling, or the limit on how much the US can borrow to cover spending it’s already done. Every time the government reaches that limit, Congress must vote to extend it.
As the US hurtles toward a mid-October deadline, they’re haggling once again, split straight down party lines with Republicans refusing to help Democrats find a solution despite catastrophic stakes for the US economy.
That’s why some Democrats, including Foster and House Speaker Nancy Pelosi, say it might be time to abolish the debt ceiling altogether.
“The Congress has taken up a tradition of having to vote on [the ceiling],” Pelosi said on Thursday. “There’s some doubt as to whether that should be the case.”
Sens. Mark Warner of Virginia and Chris Murphy of Connecticut both told Insider the ceiling should go. Warner said he believes there’s support for it on both sides of the aisle.
A spokesperson for Sen. Michael Bennet’s office said the Colorado congressman has “long supported eliminating the debt limit to permanently lift the threat of default from our economy.”
Others suggested the borrowing process is due for an overhaul.
“The idea of having this annual wrangle over how to make certain that the United States honors the legal obligations it’s already taken on makes no sense,” Sen. Elizabeth Warren of Massachusetts told Insider. “It’s time for us to acknowledge that the real work is done when Congress votes to spend the money.”
How to kill the ‘silly rule’
The idea of eliminating the limit is growing in popularity. A group of Senate Democrats introduced legislation to end it in May 2019 and revived the measure in May 2021. It has become a “politicized weapon used for leverage,” the lawmakers said in a May statement, saying it’s time to “defuse the bomb.”
Past adjustments were typically approved on a bipartisan basis as lawmakers agreed on the need to pay the government’s bills, but that changed weeks ago. In the latest example of what some politicians call “hostage-taking,” Senate Republicans spearheaded by Minority Leader Mitch McConnell are trying to force Democrats to lift the ceiling on their own, even though they repeatedly voted to raise it during the presidency of Donald Trump.
“If they want to tax, borrow, and spend historic sums of money without our input, they’ll have to raise the debt limit without our help,” McConnell said Thursday, which obscures the fact that raising it this time would pay the bill for Trump’s December 2020 stimulus package.
With the GOP holding back support, the politics could “make all the planets align to get this done,” Rep. Foster said.
“The progressives think it’s a good idea for self-evident reasons. And a lot of the moderate Democrats who listen to Wall Street are hearing nothing but applause at the idea of getting rid of this existential threat to our financial system,” he said.
House Majority Leader Steny Hoyer “was unambiguous” in his support of the bill and gave a “very nice speech” supporting it in a recent caucus, Foster said.
Saying the once-fringe proposal is now a “live possibility,” he added, “there’s a lot of enthusiasm among senior Democrats at the committee-chair level around this.”
The self-inflicted recession at stake
Congress has had to raise, suspend, or adjust the limit more than 75 times since 1960 to keep the government from defaulting on its debt.
Should the latest effort fail, federal support for state and local governments would quickly freeze and the broader economy would slide into recession, the White House warned in a Monday memo, while Treasury Secretary Janet Yellen said it would cause “economic catastrophe.”
Outside experts are even gloomier. The damage would resemble that seen during the financial crisis, with unemployment spiking to 9% and nearly 6 million jobs erased, Moody’s Analytics said in a Tuesday report.
A default could also threaten the dollar’s use as the world’s reserve currency, which depends on businesses and foreign governments having trust in the government’s debt-paying abilities. Nothing would shake that like the government actually voting not to pay its debts.
Becoming a limitless government is no easy feat
Tall hurdles still stand in the way of ending the ceiling.
For one, top Republicans still view the limit as a necessary instrument. Periodic votes to raise the ceiling are “effective to communicate to us as members, as well as the general public, that we’re racking up a lot of debt and threatening future generations,” Sen. Mitt Romney of Utah told Insider.
It’s also technically difficult. McConnell is forcing Democrats to raise it, if they do, via budget reconciliation, which requires Democrats to peg a dollar amount to the proposal. The process requires every Democrat to vote for the measure, meaning it’s already endangered by intraparty disagreements. It also means Democrats would have to estimate exactly how much they’ll need to borrow until the next ceiling. If they wanted to eliminate the ceiling for the foreseeable future, the price tag for such a measure would most likely land in the trillions.
When asked if Democrats could use reconciliation to lift the ceiling for the next 150 years, Sen. Warren alluded to the difficulty of generating that estimate: “Well, I don’t know. I haven’t been reading those children’s books at night.”
At the end of the day, Democrats and Republicans are still most comfortable telling the other side what to do. But where Republicans are leaving their counterparts to dodge recession on their own, Democrats are holding out hope for a permanent, bipartisan solution.
There’s “a lot of private enthusiasm among my Republican colleagues” to kill the ceiling, Rep. Foster said.
One could “probably find members of both parties – maybe even Leader McConnell – that would say this tool ought to be eliminated,” Sen. Warner told Insider.
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