WASHINGTON — As lawmakers on Capitol Hill struggle to push for a bipartisan bill to invest in the country’s critical infrastructure, the most powerful Republicans in Washington signaled there are limits to their party’s cooperation with Democrats.
Notably, Senate Minority Leader Mitch McConnell said Wednesday that he does not expect members of his party to support a measure authorizing the government to borrow money needed to meet its obligations later this year. .
Since the amount of debt the U.S. Treasury can issue is limited by statute, whenever Congress approves spending in excess of revenue—which it has done with every budget since 2001—the country threatens to butt against that limit. which is commonly known as the “loan limit”. “
The current national debt is $28.5 trillion, or 26% more than US GDP.
in an interview with punch bowl news, published Wednesday, McConnell said, “I can’t imagine a single Republican in the environment that we are in right now — this free for taxes and spending — to vote to raise the debt limit.”
Democrats, McConnell said, would have to take full responsibility for increasing the federal debt, suggesting they do so using a process called “budget reconciliation,” a bill put up by Filbuster in the Senate by a 60-vote. Allows to bypass the gap.
Later on Wednesday, South Dakota Sen. John Thune, the third-ranking Republican in the Senate, echoed McConnell, saying, “I don’t think there is a single Republican senator who considers raising the debt limit so that Democrats can expand government.” and spend massively as something they would like to support in the end.”
Congressional Democrats Furious
Democrats in Congress were quick to point out the wrong direction inherent in McConnell and Thune’s statements. The Treasury will have to meet several obligations later this year, and those that will require more borrowing have nothing to do with legislation currently being considered in Congress. Instead, they stem from decisions made in the past, when Republicans controlled one or both houses of Congress.
In particular, Democrats pointed to tax cuts passed in the first half of the Trump administration — when Republicans controlled Congress — that severely reduced federal revenue. They also point out that the government’s initial response to the coronavirus pandemic, while Republicans were in charge of the White House and the Senate, was also the driver of the debt.
Calling McConnell’s position “shameless, cynical and outright political,” Democratic Senate Majority Leader Chuck Schumer said Wednesday, “This debt is Trump debt. It’s COVID debt. And the bottom line is that Leader McConnell has to The political game should not be played with the full faith and credit of the United States. Americans pay their debt.”
Asked about McConnell’s suggestion that Republicans would not support an increase in the debt limit, President Joe Biden pointed out that Democrats had voted twice for an increase in the debt limit during his predecessor’s four-year term.
“I was hoping that wouldn’t happen. You know, for the last four years, they’ve raised the debt limit,” Biden said.
“The reason for the significant debt is because of their … tax cuts,” he said. “And there’s going to be some very difficult decisions that have to be made to achieve that by the end of the year. And one of them is the debt limit and the extension of the loan. So, I don’t have an answer for you, but this Is – I hope we can get it.”
If the United States fails to pay its debts on time—whether that means interest payments on bonds, Social Security benefit checks, or government payrolls—the consequences could be catastrophic for both the US and the wider global economy.
The debt issued by the Treasury is the closest to the risk-free asset that investors can buy, and is used to benchmark any other asset in the capital markets. If the value of those securities is suddenly put into doubt, there will be dire consequences for the global economy.
The consequences of a US default will be so profound that many assume it will never be allowed to happen. But lawmakers have danced too close to the edge in the past. In 2011, when House Republicans battled with Democratic President Barack Obama over federal debt, bond rating firm Standard & Poor’s issued the first downgrade of US sovereign debt, triggering a major stock market sell-off.
some hope of cooperation
Not everyone believes that McConnell and Senate Republicans will inevitably succeed in forcing Democrats to take full responsibility for debt ceiling increases.
Mark Goldwyn, senior vice president and senior policy director of the Committee for a Responsible Federal Budget, said he believes Democrats have a chance to persuade at least some Republicans to increase the backdoor of the limit. , which can be achieved with a vote to “suspend” it rather than extend it.
“I would not rule out a bipartisan loan limit increase,” Goldwyn said. “I think it’s the most likely option.” That could be achieved by attaching a suspension to the bipartisan infrastructure bill currently being written in the Senate, he said, or to a larger budget bill at the end of the fiscal year, assuming the Treasury is already out of money. is not out.
The existence of the debt limit as a pivotal point in American politics is an accident of history. Originally the purpose of the limit was to make loan issuance easier – not more difficult. Congress was required to vote on the issuance of debt by the Treasury, a process that became cumbersome as the country and government grew.
In 1917, with the country raising funds through the issuance of bonds to support its participation in World War I, Congress gave wide approval for all debt issuance up to a specific amount. It was only after decades that the debt ceiling became an instrument of hindrance. However, as Goldwyn points out, this is a problem the country brings upon itself on a regular basis.
“As long as we keep borrowing money, we will have to raise the loan limit or suspend it,” he said. “This has been a reality in the United States for a very long time.”