How Biden Could Short-Circuit McCarthy on the Debt Ceiling

6 minute read
Wallach is a Senior Fellow at the American Enterprise Institute and the author of WHY CONGRESS to be published by Oxford University Press on May 30th

The U.S. Treasury will soon exhaust the “extraordinary measures” currently allowing it to pay the country’s bills on time. We don’t know exactly when—maybe as late as August, but maybe as early as June. What is certain is that if our country’s legislators delay raising our statutory debt limit much longer, we risk a massive self-inflicted wound.

There are two leading visions of how we can avoid calamity—both of which exhibit a regrettable complacency about the political dynamics of Washington. On the one hand there is President Biden’s: there will be no negotiation, and at some point, the House and Senate will both pass a “clean” increase of the debt limit whether they like it or not, because no one will want to take responsibility for bringing on a default.

On the other hand is Speaker Kevin McCarthy’s: House Republicans will stick together, almost to a man, which will enable the Speaker to drive a hard bargain with Senate Democrats and the president. Some compromise will be worked out that most members on both sides of the aisle will accept, and a bill increasing the debt limit while (perhaps) putting in place caps on discretionary spending will sail through the House with 300 votes. McCarthy will declare, “Elections have consequences.”

The problem is that, while neither of these scenarios is impossible, neither one looks terribly likely, either. For the first to come to pass at least a handful of House Republicans would have to decide to push through a bill that the vast majority of their conference sees as a total capitulation. That would be procedurally fraught and disastrous for party cohesion for the remainder of the 118th Congress. From the beginning, even moderate Republicans such as Rep. Don Bacon (R-NE) have insisted they are against a clean increase bill. Biden and Democrats have no inherent right to a debt limit increase—when they controlled the House and Senate in December 2021, they chose to push through a modest-sized $2.5 trillion increase instead of going bigger. Having now lost control of the House of Representatives, they have no choice but to persuade some Republicans. It might take a sizable stock market sell-off before enough pressure mounts, and, of course, it would be best to avoid that.

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The second scenario probably has a better chance, but it requires a good faith negotiation between McCarthy and the White House. Biden has shown remarkably little willingness to enter into such negotiations, and it remains unclear if McCarthy can make concessions to the president without alienating his conference. Indeed, given some of the rhetoric during the Speakership fight in January, it seems that there are a significant number of Republicans (well beyond those who withheld their support from McCarthy through many rounds of voting) who would see any debt limit dealmaking as a sell-out to the Beltway establishment. The House’s recent narrow passage of the Limit, Save and Grow Act of 2023 does very little to change this underlying concern, since the bill was widely understood as an exercise in partisan agenda-setting with no chance of advancing in the Senate.

Is there no other way out of this impasse?

Some commentators will tell you that the best way is for the President to simply declare that the debt limit is contrary to the 14th Amendment, or for the Treasury Department to issue a trillion-dollar platinum coin. These exercises in executive self-aggrandizement are horrific ideas which would destabilize markets all on their own. As counter-productive as the debt limit may be, it is the law of the land, and pretending otherwise would inflame our already acrimonious politics.

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What is remarkable is that nobody seems to contemplate a negotiation process that rejects the model of top partisan leaders figuring everything out. That was the dominant model in the Pelosi years, and it is what brought us debt limit compromises in 1996 and 2011. But it is the exception, not the norm, in American political history, and the difficulty of this present crisis suggests it may not be equal to the moment in 2023.

If what the White House needs is a majority coalition for governing in the House, why not try to build one, by identifying potential partners among Republican members, asking them what they need to be able to vote for a debt limit increase, and then attempting to negotiate directly with them?

Bacon, for his part, already indicated that he might be open to such an approach when he told Haley Byrd Wilt of The Dispatch, “If these negotiations fail, we want to have a landing spot where we can still have a compromise and make progress for the country.” Nor is he some kind of lone wolf. Rather, he is an active member of the Problem Solvers Caucus, which has already shown its seriousness on these issues by offering a sensible framework for pairing a debt limit increase with a set of reforms meant to help the country get its fiscal house in order in the years ahead.

It may thrill some Democrats when Biden insists that attaching any conditions to a debt limit increase amounts to “hostage-taking.” But if he is serious about taking responsibility for governing, he needs to engage with members making reasonable asks. Moderates in particular do not want to go down with the ship. And yet it doesn’t make sense to just assume that they will accede to an increase in exchange for nothing. That’s all the White House has been offering so far.

For that matter, Biden would be well-advised to try to open lines of communication with lots of Republican factions, from the Main Street Partnership to the Freedom Caucus. Getting these groups to make specific asks would help clarify what is really at issue in this debt limit struggle, even if they failed to produce a deal. The White House would be well-served by positioning itself to treat with factions for the future, rather than assuming it would need every deal to run through McCarthy. One need recall only as far as the Bush administration working with Democratic policy partners on education, health care, tax reform, and defense to see that building bipartisan coalitions does not always require a leadership-endorsed deal.

To be sure, a majority coalition of Democrats and moderate Republicans in the House would not have an entirely straightforward path getting a vote on their plan if the Speaker opposed it. But getting hung up on procedural details is beside the point. The House is a majoritarian institution, through and through, such that a determined majority can always find a way. Party discipline has been remarkably steady in recent years, which has made it seem like the Speaker necessarily possesses an iron grip on the House’s agenda. But the potential for a bipartisan majority to assert itself always lurks. It may be time to realize it in pursuing a solution to the debt limit.

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