Democrats face a vexing question in rounding up the votes later this summer or fall to ensure that the U.S. government doesn’t default on its obligations to its citizens and creditors around the world.
Do they simply raise the statutory debt ceiling to a new, higher dollar figure that could top $30 trillion? Or do they use the maneuver that majorities on both sides of the aisle have employed for the past decade and “suspend” the debt limit until some later date, likely after next year’s elections?
Upping the borrowing limit by a specific amount is always a challenge because it puts a political target on the backs of those who vote for higher debt. It may prove even more difficult this year given narrow Democratic majorities in the House and Senate and projections that the debt is on a path to break the post-World War II record as a share of the economy.
Debt limit suspensions are “less open to attack” from the other party, said Shai Akabas, director of economic policy at the Bipartisan Policy Center. That “has historically been a factor for both parties, and I imagine is a component of consideration now,” he said.
Even that method is no slam dunk for party leaders. In 2019, in the last debt limit suspension vote as part of a broader bill to increase discretionary spending caps, 16 Democrats in the House and five in the Senate voted “no.”
Four of those House Democrats were moderates who lost their seats in 2020, and six are on the National Republican Congressional Committee’s target list for 2022: Josh Harder of California, Abigail Spanberger of Virginia, Ron Kind of Wisconsin, Kurt Schrader of Oregon, Stephanie Murphy of Florida and Kathleen Rice of New York. None responded to requests for comment.
After Monday night when Rep.-elect Melanie Stansbury, D-N.M., is seated, House Democrats will have only four votes to spare on partisan legislation.
The five Senate Democrats who voted “no” two years ago were Joe Manchin III of West Virginia, Michael Bennet of Colorado, Thomas R. Carper of Delaware, Amy Klobuchar of Minnesota and Jon Tester of Montana. Klobuchar and Bennet at the time were running for president; Bennet is up for reelection next year. Inside Elections with Nathan L. Gonzales rates his seat “solid Democratic.”
Bennet, Carper and Manchin released statements at the time pointing to an unsustainable U.S. fiscal picture. Bennet voted against a similar law the previous year, but all five of those senators consistently voted for debt limit bills during the past decade, with the exception of Manchin in January 2013.
A big selling point of the suspension approach, at least in the House, is that under the chamber’s rules, once a budget resolution is adopted, it automatically spins out to the Senate a debt ceiling suspension measure through the end of the upcoming fiscal year.
After factoring in so-called extraordinary measures that the Treasury Department can employ to stay under the borrowing cap, it could be well past the midterm elections before the issue comes up again. So the House could avoid a separate, politically charged vote to suspend the debt limit — but it would still take 60 votes in the Senate.
Using the budget reconciliation procedure, which requires only a majority vote in both chambers, then becomes a much more attractive option. But Democrats would still need to maintain party unity, and it’s not clear that a debt limit suspension would be allowed in reconciliation.
The 1974 budget law says the annual resolution used to provide reconciliation instructions can “specify the amounts by which the statutory limit on the public debt is to be changed and direct the committee having jurisdiction to recommend such change.” Some budget experts point to that language as evidence that a suspension wouldn’t make the cut.
Reconciliation has been used four times to raise the debt limit — in 1986, 1990, 1993 and 1997 — but a suspension has never been done that way. While there have been informal conversations in the past between Senate staff and the parliamentarian about whether reconciliation can be used to suspend the debt ceiling, the question hasn’t been decided.
In a May 25 report, the Congressional Research Service said that “it might be allowed because suspending the debt limit and raising the debt limit might be considered equivalent as policy options.” The report added that “there have been no rulings made on points of order raised in the House or Senate with respect to language in budget reconciliation legislation concerning the debt limit.”
Another $2 trillion?
When the debt limit suspension expires July 31, the borrowing ceiling will reset to the total accumulated debt at that time.
Debt subject to limit on June 10 stood at nearly $28.2 trillion. The White House estimated last month that debt will top $30.2 trillion by the end of September, with over $2 trillion more needed to get through another year in the lead-up to the 2022 midterms, depending on which of President Joe Biden’s new spending and tax proposals get enacted.
Estimates vary for when the debt limit must be dealt with. Treasury has said action could be needed before the August recess, while some independent analysts say lawmakers could have into October, or even later, before Treasury runs out of borrowing room.
Failure to ease the borrowing cap in time would be unprecedented. It could lead to Treasury delaying critical payments like Social Security benefits, military salaries and the like, as well as defaulting on interest payments to bondholders. That could lead to investors demanding higher interest rates to compensate for a greater perceived risk, which in turn would drive up borrowing costs further.
Republicans in the past have tried to attach spending cuts or budget process changes to debt limit increases — mostly when Democrats were in control of the White House or Congress. In April, the Senate GOP Conference adopted a nonbinding rule requiring any debt limit increase to be offset with spending cuts or “structural reforms” in federal spending.
Last week, one of the authors of that rule, Rick Scott of Florida, led eight other Republican senators in introducing legislation to require the Office of Management and Budget to declare a “federal debt emergency” in any fiscal year when public debt exceeds the size of the U.S. economy. That point already has been reached, as debt hit 100.1 percent of gross domestic product in fiscal 2020 and is projected to rise to 102 percent of GDP this year.
During a debt emergency, the government would be required to terminate unobligated funding from the $1.9 trillion COVID-19 relief bill passed in March and prior aid packages. The proposal would require legislation that increases spending or deficits to include offsets or be subject to a point of order that requires two-thirds of senators to waive. The bill would provide expedited procedures for legislation that would reduce the deficit through spending cuts by at least 5 percent over 10 years.
‘No budget, no pay’
Scott’s measure is unlikely to advance. But Senate Budget ranking member Lindsey Graham, R-S.C., told reporters last month he’d like to attach strings such as withholding lawmakers’ salaries unless they adopt a budget resolution or pass the annual appropriations bills. He said such a measure would be “responsible” and wouldn’t lead to dangerous debt limit brinkmanship. “I mean, we’re not going to play chicken here,” Graham said.
In early 2013, the debt limit law that Manchin voted against would have put member pay in escrow until the last day of the 113th Congress in each chamber that hadn’t adopted at least its own version of a budget resolution before April 15. Manchin thought lawmakers shouldn’t get their pay at all if they didn’t adopt a budget.
Lawmakers put in the provision releasing member pay at the end of the Congress so as not to run afoul of the Constitution’s 27th Amendment, which prevents decisions on member pay changes until after an election has occurred.
Scholars questioned whether that provision would adhere to the 27th Amendment, in part because of the time value of money — a dollar received in two years is worth less than a dollar today — which could be construed as a pay cut. But it was a moot point since each chamber adopted its own budget blueprint in March, beating the debt limit law’s deadline.