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With the stability of the U.S. economy hanging in the balance, Democrats and Republicans in Congress are once again engaged in their semi-regular game of chicken, trading barbs over who is responsible for raising the debt ceiling.
The federal government operates on a deficit, meaning it spends more than it takes in, so it has to borrow money to make up the difference. The debt ceiling is a dollar figure set by Congress that represents the maximum amount the U.S. Treasury is allowed to borrow. It doesn’t itself increase the deficit, but simply creates room for the government to keep its financial commitments.
For most of the past century, the debt ceiling was routinely raised on a bipartisan basis with little drama, largely because both sides understood that failing to do so would lead to what Treasury Secretary Janet Yellen recently called “widespread economic catastrophe.” If the government was unable to pay its bills, funding for things like Social Security, military salaries, and a long list of programs would suddenly dry up. This abrupt halt to federal spending would likely be accompanied by a “historic financial crisis” that could create global recession.
In recent decades, debt ceiling votes have become increasingly fraught as Republicans have used the risk of default to extract concessions from Democratic presidents. The U.S. came perilously close to breaching the debt limit in 2011, when the GOP-controlled House of Representatives refused to approve an increase until then-President Barack Obama agreed to significant spending cuts.
Today, Republican Senate Minority Leader Mitch McConnell is insisting that there will be no GOP votes to raise the debt ceiling, which leaves Democrats to resolve the issue themselves. The debt limit was technically breached at the end of July, but the Treasury is currently using what it calls “extraordinary measures” to stave off default. Yellen anticipates those measures will be exhausted by mid-October.
Why there’s debate
The debt ceiling and the disaster looming if Congress doesn’t agree to raise it are entirely self-imposed. No other wealthy country has regular do-or-die fights over the amount its government can borrow. But it would also be relatively easy for lawmakers to eliminate the debt ceiling or raise it so high the deficit would never come close to breaching it. So why has Congress never taken the chance to free itself from this economic time bomb for good?
The most commonly cited answer for the continued existence of the debt ceiling is that both parties see the regular fights over raising it as a chance to score political points against their opponents. Many Democrats see debt ceiling votes as a no-win situation for Republicans — either they betray their anti-deficit principles by voting to increase it, or risk coming off as economically reckless. The GOP, on the other hand, has used the votes to accomplish some of its policy goals — like spending cuts. In 2011, McConnell called the debt limit “a hostage worth taking.”
Some pundits argue that both sides invite fights over the debt ceiling because they know deep down that, for all of the posturing, neither party is foolish enough to actually allow the country to default on its debts. That knowledge, they say, allows lawmakers to take part in an attention-grabbing form of political theater with little risk of major consequences.
On top of an impending breach of the debt ceiling, Congress also need to pass a spending bill this week to avoid a government shutdown. A procedural vote on a bill that would have addressed both issues was blocked by a Republican filibuster in the Senate on Monday night. With only a few days left before government funding runs out, Democrats are reportedly considering decoupling the two measures in hopes of convincing the GOP to back the spending bill on its own.
Neither party is willing to eliminate a tool they may find useful down the road
“Each party, when out of power, has taken it as a political hostage, with Republicans being more ruthless.” — Paul Kane, Washington Post
Everyone involved knows that the U.S. won’t ever breach the debt ceiling
“It’s true that a default on the federal debt would fracture the economy and unleash a blood-dimmed tide over humanity — but it’s equally true that such a calamity has never happened, won’t happen this time and will likely never happen because members of Congress who love to play chicken never follow through. They always chicken out.” — Jack Shafer, Politico
Lawmakers underestimate the risk that political posturing could go terribly wrong
“Some argue that the debt limit provides useful leverage to extract fiscal reforms that would be hard to enact otherwise. However, the full faith and credit of U.S. securities should never be put at risk as a mere bargaining tool. Even if intended as a bluff, there is a risk that this tripwire might be triggered accidentally.” — Robert L. Bixby, The Hill
Conservatives use debt-limit fights to reign in government spending
“The debt-limit debate is one of the few opportunities for Congress to reconsider implementing a financially ruinous increase in federal spending. Fiscally responsible members of Congress should not waste this opportunity.” — Wayne Winegarden, National Review
Voter misconceptions about the debt limit make it a potent political weapon
“Because the public closely associates the need to raise the debt limit with the decisions that made it necessary (always blamed on the ‘other side’), debt limit increases are consistently unpopular, and not only with the Republicans who are typically moralistic about the very idea of debt. ... So politicians of both parties look for every opportunity to vote against such measures, or at a minimum to make sure the ‘blame’ is shared across party lines.” — Ed Kilgore, New York
Both parties grossly misunderstand the political incentives of debt-ceiling fights
“Imposing short-term costs on individuals who would be affected directly, along with medium-term costs on the economy, in exchange for the possibility of a public-opinion boost that everyone will have forgotten well before the midterms, is a bad bargain even if it works.” — Jonathan Bernstein, Bloomberg
Debt-ceiling battles allow both sides to avoid tough conversations about the federal debt
“The way forward must eliminate the debt-limit brinkmanship that endangers our economy. It should also replace the recurring hand-waving and shouting over $28 trillion of debt with a structured debate of substantive proposals to address the underlying imbalance between taxes and spending. As the old saying goes, ‘Put the legislative text where your mouth is.’” — Shai Akabas, Roll Call
Republicans believe the worst-case scenario would be good for them politically
“Instead of Republicans learning how bad an idea taking the debt ceiling hostage is, we’re in a situation again where the GOP and McConnell in particular are betting against the United States in order to maximize their own political fortunes. If the American people and companies take a beating in a new recession, what does it matter if during the midterm elections Biden and Democrats get the blame?” — Hayes Brown, MSNBC
The debt ceiling allows lawmakers to have it both ways when it comes to the deficit
“It’s simply a way for members of Congress to have it both ways—to vote for deficit-busting tax cuts and spending increases, while irresponsibly refusing to provide a method of financing the deficits that those votes necessarily created. A precise analogy would be to run up charges on one’s credit card and then refuse to pay the bill on the grounds of personal financial responsibility.” — Bruce Bartlett, New Republic
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