WASHINGTON — In 2011, after faltering debt limit negotiations with House Republicans brought the U.S. to the brink of economic calamity, President Barack Obama and Vice President Joe Biden sat by the fireplace in the Oval Office, with their top aides on the couch. While relieved at having narrowly averted disaster, they were stunned by what had transpired.
Obama and Biden made a vow: Never again.
They agreed that going forward, “Nobody can use the threat of default or not increasing the debt limit as a negotiating tool,” said a former Obama official involved in the fiscal discussions, who recounted the Oval Office meeting and the “lesson of 2011” they all discussed. “It made you hold your stomach. You couldn’t believe you were at this situation," the official said.
The U.S. had just suffered its first credit downgrade. Markets were rattled. Consumer and business confidence was shaken. Stocks took a hit. And the recovery from the Great Recession was in question. Democrats averted the cliff — by acceding to $2 trillion in spending cuts the GOP had demanded after negotiations on a “grand bargain” broke down — but Obama and Biden agreed that the mere threat of default had taken a serious toll.
“They said: This is the sad lesson we’ve learned,” the Obama official said, describing the mood in the room. “It was an unimaginable self-inflicted wound in 2011.”
Twelve years later, Biden is executing on that lesson as he faces down a new Republican-controlled House that is similarly demanding spending cuts as a concession for extending the debt ceiling. He says there won’t be any negotiations, and Congress must allow the government to pay its bills. “I will not let anyone use the full faith and credit of the United States as a bargaining chip,” Biden said Thursday in Virginia.
His stance has drawn a rebuke from House Speaker Kevin McCarthy, R-Calif., who said he’s “disappointed” but has remained steadfast in his call for spending cuts. As in 2011, the GOP speaker runs a House majority full of ideologically driven conservatives who want to use the debt limit as leverage to force budget changes on a Democratic-led Senate and White House.
“Here’s the leader of the free world pounding on the table, being irresponsible, saying ‘no, no, no, just raise the limit, make us spend more.’ No. That’s not how adults act,” McCarthy told reporters at the Capitol last week. “Let’s find common ground, and let’s eliminate the wasteful spending to protect the hard-working taxpayers.
“So the longer he waits the more he puts the fiscal jeopardy of America up for grabs.”
The standoff raises the stakes for Biden and Republicans ahead of what Treasury says is a June 5 deadline to act or risk default. Democratic leaders in the House and Senate are backing Biden and demanding that McCarthy present his plan and pass it through the House before any discussions occur. It sets the debate on a different trajectory than in 2011, when Obama tried to negotiate a budget deal with Republicans in exchange for raising the debt limit, which faltered several times and brought the U.S. to within days of default. It’s unclear how this one ends.
David Schnittger, who worked as deputy chief of staff to then-Speaker John Boehner, recalled that in 2011, House Republicans could compel the White House to come to the table by securing enough votes behind their opening bid: attaching a debt ceiling increase to a balanced budget amendment.
“It is possible we will eventually see House Republicans put forth a plan for dealing with both the debt limit and the spending problem. That’s what the House GOP majority did in 2011 with the ‘cut, cap and balance’ proposal,” Schnittger said in an email. He argued that the law requiring Congress to raise the debt ceiling, rather than increasing it automatically, exists to “compel a discussion — or negotiation” on budget policy when debts pile up.
It’s unclear whether McCarthy can find 218 Republican votes for a bill of his own in his narrow House majority. And, so far, Republicans have no unified plan as to what spending they want to cut.
After 2011, the Obama White House drew a hard line when the debt limit deadline came up again in early 2013. Then-White House spokesman Jay Carney said in January of that year: “Congress can pay its bills or it can fail to act and put the nation into default.”
House Republicans relented, attaching a debt limit extension to a symbolic measure calling for passing a budget.
Under that posture, Congress, under a GOP-led House, extended the debt limit three more times — in October 2013, February 2014 and November 2015 — either with a symbolic add-on or a bipartisan budget that both parties had agreed to. The threat of default was off the table. Over that period, spending went back up, with Democrats seeking more domestic money and Republicans backing more military funding.
Asked about Biden's position and the GOP criticisms, the White House said the president “takes a backseat to no one” on pursuing bipartisanship, but said that the no-negotiations stance from 2013 onward on the debt limit succeeded.
“Asking why it’s been 12 years since Democrats stopped paying ransom in exchange for Republicans not triggering an economic crisis is a self-defeating question,” White House spokesperson Andrew Bates told NBC News. “In 2011, the Obama-Biden administration negotiated in good faith but congressional Republicans’ recklessness caused an historic blow to our economy. That’s why the administration didn’t negotiate in 2013 or after.”
Dan Pfeiffer, a senior Obama White House aide from 2009 to 2015, said Biden is “absolutely” making the right call in refusing to “let an extremist minority use a potential default” to impose bad policy.
“Everyone seems to have forgotten that there was a debt limit standoff in 2013 where Obama adopted the no-negotiation approach and prevailed with a clean debt limit,” he said.
Biden’s landscape includes similarities and differences to Obama's. Boehner had a large House majority in 2011 and could afford plenty of defections; today McCarthy can spare only four votes. The GOP is more divided now about whether to cut Social Security and Medicare spending. And Senate Minority Leader Mitch McConnell, who played an instrumental role in 2011 talks, now puts the onus on McCarthy to find a way forward.
“John Boehner was a weak leader, but he genuinely wanted to avoid default. It’s not clear McCarthy knows what’s really at stake or has the savvy to avoid default,” Pfeiffer said in an email.
“On the positive side," he said, Democrats could try to force a debt ceiling vote if just a few Republicans get nervous about the possibility of default. "The narrow majority means that if a clean bill ever comes to the floor, you will only need a small handful of Republican votes to avoid default.”