President Biden is offering congressional Republicans a reasonable path to resolve the standoff over raising the federal debt ceiling. He has rightly insisted the ceiling itself must be raised without conditions, so the government can meet the obligations it already has incurred, while expressing a willingness to separately negotiate measures to slow the growth of the federal debt.
As Mr. Biden and congressional leaders prepare to meet on Tuesday, the question is whether Republicans are serious about avoiding a crisis. The party’s leaders so far have offered up only a mix of outlandish demands and reckless threats. A bill to raise the debt ceiling that House Republicans passed last month, which House Speaker Kevin McCarthy describes as the party’s negotiating position, is more in the nature of a demand for unconditional surrender. It would require Democrats to accept a long wish list of Republican priorities, including deep cuts in federal spending, and to accept the reversal of recent victories, including investments in tax enforcement and green energy. All for less than a year of peace before the government would hit the debt ceiling again.
There is not much time for an agreement to be hammered out: The federal government may not have enough money to meet all of its obligations as soon as the beginning of June.
Debt ceiling crises have become a recurring feature of American political life. The government requires congressional permission to borrow money; Congress does so by setting a limit on total borrowing. Raising that limit was once a routine act of good housekeeping, but Republicans have seized on the votes as a chance to refight battles they are otherwise unable to win, demanding the reversal of legislation already passed and of spending already approved.
The United States borrows heavily to cover a growing gap between tax revenue and spending. The federal debt totals about $24.6 trillion, equal to roughly 94 percent of the nation’s gross domestic product, a high level by historical standards. The government spent nearly $1 trillion on interest payments in the first quarter of the year, and the combination of rising interest rates and an ever-larger debt is likely to raise that figure substantially.
The debt ceiling, however, is not a useful mechanism for preventing the federal government from living beyond its means. When Congress passes a spending bill, it makes a commitment to spend money on roads or aircraft carriers or cancer research. People’s lives and livelihoods depend on those promises. Much of the nation’s economic activity depends on those promises. And to meet those obligations, whatever is not raised in taxes must be borrowed. A debt limit was intended to facilitate that borrowing. Until World War I, Congress voted on individual rounds of borrowing. In 1917 it instead authorized borrowing up to a fixed limit. But that limit does not stop the government from incurring new obligations that can be met only by raising the debt limit. As a result, as this board wrote in 1961, “The debt limit does not limit the debt.”
Republicans who have seized on debt ceiling votes as useful leverage are playing a dangerous game. And it has become more dangerous over time because the repeated rounds of chicken have emboldened some to doubt that hitting the ceiling would cause a crisis. This is highly irresponsible. As most members of Congress profess to understand, Treasuries are regarded around the world as the nearest thing to a risk-free investment, and investor confidence that the United States will repay its debts does not just provide a safe harbor for investors; it is also the basis of a wide range of other transactions. A blow to that confidence would have far-reaching economic consequences for America’s central role in shoring up the global financial system.
A functional government cannot debate whether to pay its bills, and Mr. Biden has rightly insisted that there can be no price for raising the debt ceiling. But there is a difference between talking about the federal debt and talking about the debt ceiling. Congress has an obligation to pay what is already owed, but the president and congressional Republicans ought to spend more time talking with each other about the scale of future borrowing.
Given the popularity of the programs that account for the vast majority of federal spending, the most sensible way for the United States to reduce its reliance on borrowed money is primarily by raising taxes.
Still, Democrats may also have to accept that, having failed to get rid of the debt ceiling last year, a future deal with this Republican House will require some spending cuts, too. Democrats could have voted to eliminate the debt ceiling between the fall elections and January, when Republicans took control of the House, or they could have voted to provide the government with sufficient borrowing capacity until the next congressional elections in 2024. Instead they chose this confrontation. Mr. Biden last fall labeled proposals to eliminate the debt ceiling “irresponsible.” Other Democrats appeared to relish the politics of a fight. Now they are facing the consequences, which will most likely include the partial reversal of legislative victories won during Mr. Biden’s first two years.
Should another opportunity arise, perhaps Democrats will take the lesson.
There are sensible alternatives. Senator Mitch McConnell of Kentucky, the minority leader, proposed in 2011 that Congress should empower the president to raise the debt ceiling. A group of Democratic senators introduced legislation to that effect this year. Under the plan, a two-thirds vote in both houses could still block an increase.
Abolition would be even more expedient. Congress could simply authorize the government to borrow the funds necessary to make any payments that Congress has separately authorized.
Indeed, some Democrats and liberal groups argue that the administration could get rid of the debt ceiling unilaterally — for example, by issuing special kinds of bonds or even by minting a single, valuable coin. The legality of such measures is uncertain, the consequences unclear.
Administration officials reportedly have also discussed whether the president could assert that the debt ceiling is unconstitutional, because the 14th Amendment requires the government to meet its financial obligations to creditors. This could eliminate the debt ceiling, but the potential for a court fight and financial volatility is significant.
The Treasury secretary, Janet Yellen, put it well when she said in 2021 that it would be a crisis simply for the United States to be in a position in which it faced a choice between such experiments and default. She reiterated on Sunday that there are “no good options” if Congress does not act. “We should not get to the point where we need to consider whether the president can go on issuing debt,” she said. “This would be a constitutional crisis.”
There is still time for Congress to act before the United States finds itself confronting those kinds of fateful choices.
