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Oh Boy, Another Debt Ceiling Showdown!
Wait, there's a government shutdown showdown TOO? (Swoon)
As you may have noticed, a Democrat got elected president, and that means that Republicans have rediscovered their Very Deep Concerns about the national debt. And as usual, Senate Minority Leader Mitch McConnell has vowed to fight any new spending by blocking any increase in the debt limit, which allows the government to borrow to pay for the things Congress has already authorized, like the $7 trillion in debt added to the debt during Donald Trump's four years in office. Mind you, if the US defaults on its debt, that would pretty much wreck the economy, not just in the US but in the whole wide world.
You might not remember any fights over the debt ceiling since 2017, since Republicans routinely suspended the limit while Trump was "president." But now, it's time for that ritual game of chicken again, with McConnell threatening to crash the economy to make a point, and President Joe Biden saying he won't negotiate away any of his policy priorities i n exchange for GOP votes to raise the debt limit, because for criminy sake, it's irresponsible to threaten to default on the debt.
In addition to the debt limit fight, Congress also needs to pass a bill to fund the government by September 30, or we could have another government shutdown. That would be just a terrific idea during a surge in coronavirus cases, wouldn't it?
Fortunately, neither of these nightmare scenarios is likely to come to pass; the question is really a matter of how Democrats will get the necessary bills passed, and whether any Republicans at all will help. Haha, what a silly question!
The last suspension of the debt limit passed under Trump actually expired at the end of July, but because it's the federal government, Treasury Secretary Janet Yellen actually has been able to use a number of Weird Tricks — or "extraordinary measures" — to keep the government coasting along for a while. (The Washington Post doesn't specify, but we bet it involves writing checks in green ink, or tearing one corner of the check to delay processing, like your co-workers recommended when you were waiting tables.) Unlike the statutory September 30 deadline for funding the government, the actual moment the US won't be able to pay its bills is a bit fuzzier, but Yellen projects it will hit sometime in October, so could Congress please just suspend or raise the debt limit?
Now, it's worth remembering that raising the debt limit has absolutely fuck-all to do with "allowing more reckless Democrat spending," as Republicans always claim when a Republican isn't in the White House. It's about allowing continued borrowing to pay for stuff the US has already committed to, like everything. As the expiration of the last suspension neared in July, Yellen wrote to Congress to explain that
Increasing or suspending the debt limit does not increase government spending, nor does it authorize spending for future budget proposals; it simply allows Treasury to pay for previously enacted expenditures. [...] The current level of debt reflects the cumulative effect of all prior spending and tax decisions, which have been made by administrations and Congresses of both parties over time.
And once that fact gets noted, Republicans get right back to insisting they won't allow a penny more of reckless Democrat spending to rob our children's futures, and certainly not for stuff that will ensure those kids will have a future.
This week, House Speaker Nancy Pelosi (D-California) and Senate Majority Leader Chuck Schumer (D-New York) will take a first shot at averting a shutdown and debt default, with a bill that will suspend the debt limit through December 2022, and also fund the government for the next three months. To make it potentially more attractive to any Republicans who might be thinking of actually helping residents of their states, the bill would also include disaster relief funding for things like wildfires in the West and the damage from Hurricane Ida, from Louisiana through the Northeast.
That may still not be enough to pry 10 Republicans away from McConnell's promise that no Republicans in the Senate will allow an expansion of the debt limit. McConnell said last week that since Democrats hold the White House, the Senate, and the House, well then, it's their job. He is such a wry fellow!
The country must never default. The debt ceiling will need to be raised. But who does that depends on who the American people elect. [...] The Democratic leaders have every tool and procedure they need to handle the debt limit on a partisan basis, just like they are choosing to handle everything else.
Oh, those fiendish very partisan Democrats!
And indeed, Democrats can use reconciliation to pass temporary funding and to raise the debt limit, although they'd prefer a bipartisan bill to suspend the debt limit instead. For one thing, reconciliation would require setting a specific higher debt limit that would give Republicans a number to wave around in 2022 campaign ads. For another, as the Post explains,
Democrats say it makes little sense for them to bear sole responsibility for voting to approve a debt ceiling increase that was required by bipartisan legislation and other measures supported by Republicans. [...]
The White House says the GOP's position is nakedly political and flies in the face of the party's prior actions and statements. McConnell himself voted to increase or suspend the debt ceiling 32 times in the past, including three times under Trump, according to the administration. A spokesman for McConnell did not contest the figure. Roughly 97 percent of the current U.S. cumulative debt was accrued before Biden took office.
Republicans under Trump approved a tax cut in 2017 that added more than $2 trillion to the federal debt, as well as coronavirus aid packages that cost more than $3 trillion. McConnell under Trump also approved additional increases in spending on domestic programs and the military budget, as concerns about the deficit among GOP leaders appeared to evaporate after emerging as a major flash point of the Obama years.
On the other hand, McConnell sees a chance to hold the "full faith and credit of the United States" hostage to score some points, so if no Republican senators are willing to get on board, Dems may well have to go with reconciliation anyway. The alternative, allowing the US to go into default, would mean drastically higher interest rates on future government borrowing, probably enough to snuff out the recovery from the pandemic recession and throw us back into a recession.
As the LA Times points out, while the US avoided an actual default in the 2011 fight over the debt ceiling, which Republicans undertook because Barack Obama insisted on still being president,
the Standard & Poor's credit rating agency downgraded U.S. debt. According to the Government Accountability Office, the uncertainty caused by that brinksmanship made it more expensive for the Treasury to borrow money, costing taxpayers $1.3 billion that fiscal year.
An actual default would raise U.S. interests costs more dramatically, financial experts say. And the effects would quickly ripple throughout the country's economy because the interest rate on Treasury securities serves as the benchmark for many other loans.
Now, what with the GOP being the party of the investor class, you might think the giant piles of money Republicans love most would be demanding McConnell and other Republicans stop this nonsense at once, but it's hard to say — McConnell may decide that flirting with a nice economic collapse is worth it if it helps the prospects of the GOP taking back Congress next year. And after that, they can loot the economy for their donors a while longer, elect a Republican president in 2024 because look at how Joe Biden tanked the economy, and leave the mess for another Democrat to clean up in '28 or '32.
So yeah, probably gonna be a reconciliation bill for the debt limit. (But can't there be only one reconciliation bill a year? Why no! "Bills described as reconciliation bills can pass the Senate by a simple majority of 51 votes or 50 votes plus the Vice President as the tie-breaker. ... Budget reconciliation bills can deal with spending, revenue, and thefederal debt limit,and the Senate can passone bill per year affecting each subject."Thanks once again,Wikipedia!)
How about setting it at a level that the US won't reach for another 40 years, can we just do that and be done with it?
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