Sparring Republican and Democratic senators reached a temporary truce over raising the nation’s debt ceiling just as the fight threatened to inflict severe economic pain on the U.S. economy. While the agreement staves off until December the battle over paying the American government’s bills, the saga also presents Democrats with an opportunity to end the fiscal charade for good by effectively abolishing the need for Congress and the president to routinely enact debt ceiling increases.
Congressional Democrats have a rare opportunity to abolish the troublesome debt ceiling. And if they choose to eliminate it, they’ll have support in high places.
The perennial debt ceiling fight has nothing to do with the proper amount the federal government should spend. It’s about paying off bills already racked up by the government. The time for lawmakers to limit federal spending was when budget proposals were up for consideration, not after they were approved.
Per the Treasury Department, “The debt limit is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments.” Voters might liken it to a credit card company raising their borrowing threshold while fully expecting them to pay off existing bills. It’s not a free pass to skip payment on purchases already made.
Members of both parties have long postured over the debt ceiling to proclaim their fiscally prudent bona fides — even though congressional scholars argue GOP lawmakers shoulder more responsibility for weaponizing it and threatening America’s fiscal health. Republican officials going back to the Reagan administration tried futilely to use it as a way to rein in federal spending. But the real culprit was profligate spending, creating the need for more debt ceiling increases. But deficits and the national debt rose considerably under the four GOP presidents of the past 40 years — including Ronald Reagan himself and Donald Trump, whose administration contributed about a quarter of the $28.5 trillion national debt.
Today, the government has virtually no cash and can’t fill its coffers because it can’t borrow. The potential damage is enormous. In 2011, Standard & Poor’s downgraded the credit rating of the United States government for the first time in the country's history. If the downgrade had been sustained over time, it could have made borrowing money much more expensive. And a default could leave the government unable to pay its obligations, including veterans’ benefits and salaries for federal workers.
Now, with President Joe Biden in the White House and Democrats holding majorities in the House and Senate — albeit by the narrowest of margins — the party has been on the defensive from Republicans over efforts to raise the debt ceiling by Oct. 18. That’s the date by which Treasury Secretary Janet Yellen said the U.S. government’s capacity to borrow will be exhausted.
Now that a default crisis has been temporarily averted — through a Senate deal that would raise the limit by $480 billion to extend it through early December — Democrats have a golden opportunity to end the debt ceiling permanently. Economically, that would help stabilize financial markets globally and prove the U.S. always pays its bills. Politically, it would remove this sword of Damocles that both parties like to hang over each other — and Republicans at times seem prepared to actually drop.
One way of achieving this would be to use a special budget procedure known as reconciliation, which requires only a bare majority to pass, to set the debt limit at a rate so high that even accounting for profligate spending by both parties, the federal debt wouldn’t approach a ceiling until long after every current living American has died. And their grandchildren’s grandchildren, too.
Or Democrats could reinstate the old “Gephardt rule.” The provision, named after then-Rep. Richard Gephardt, said that when Congress passed a budget, the government was automatically deemed to have authorized whatever borrowing was implied by that budget. It was kind of like a credit card company routinely raising the credit limit on a high-spending customer. But House Republicans, upon taking the majority in January 1995 and seeking leverage against Democratic President Bill Clinton in budget fights, abolished the Gephardt rule.
To get either measure through the Senate, lawmakers must use the process of reconciliation to remove the power of Republicans to filibuster — or essentially demand a 60-vote threshold for passing legislation — so they can scrap the debt ceiling on a simple majority vote that needs no Republicans to join in.
It’s an open question whether Senate Democrats would try to use reconciliation to raise the debt ceiling, however. Democrats don’t like itdue to its drawn-out and amendment-heavy process and because using it now would make it harder to use again on one of Biden’s major domestic spending items, the Build Back Better Act, unless they are willing to overrule the Senate parliamentarian’s determination about how often the reconciliation maneuver can be used. So far, the party has been reluctant to defy the chamber’s designated rules enforcer.
Whatever the logistics, congressional Democrats have a rare opportunity to abolish the troublesome debt ceiling. And if they choose to eliminate it, they’ll have support in high places. "We should get rid of the debt ceiling," JPMorgan Chase CEO Jamie Dimon said Wednesday, during a meeting between Biden and business leaders. "We don't need to have this kind of brinkmanship every couple of years."
With Biden’s poll numbers weakand dropping, there’s a decent chance Democrats in the 2022 midterm elections will lose control of the House and/or Senate. Then their leverage in future debt ceiling fights will vanish. They have a rare opportunity to end debt ceiling gamesmanship and force lawmakers who say they’re serious about cutting federal spending to do so — before the bill comes due.