New Year, New Debt Ceiling Hike, but Can Wiser Heads Prevail?

A recurring saga returned in force to Capitol Hill this week, with lawmakers jockeying for political pole position in the debate over the impending breach of the $31.4 trillion debt ceiling. The partisan bickering picked up ahead of next week’s expected brush with the debt limit, with progressive Democrats accusing Republicans of wanting to “hold American seniors hostage,” and conservative Republicans challenging Democrats to try to find a tax hike they don’t like. “We’ve seen this costly brinksmanship time and again from Republicans and it’s exactly why I’m fighting to reform the debt ceiling — so the full faith and credit of the U.S. government can no longer be used as a political hostage,” Representative Brendan Boyle, a Democrat of Pennsylvania who is the ranking member of the House Budget Committee, told the Sun. “Here is the problem. I don’t believe that Chuck Schumer and Senate Democrats want to sit down at the table and figure out how to limit spending,” Representative Chip Roy, a Republican of Texas, said on the House floor. “Okay. Come make your offer. We will raise taxes. Show me how raising those taxes is going to eliminate the deficit.”America hasn’t recorded a budget surplus since 2001. Seven times since then, the annual deficit has surpassed $1 trillion, with 2020 seeing a record $3.13 trillion deficit and 2021 a $2.77 trillion shortfall, both in part in the name of Covid stimulus. The debt-to-GDP ratio now stands at more than 100 percent.Congress last raised the debt ceiling, by $2.5 trillion, in December 2021. With an additional $1.38 trillion in deficit spending in the last fiscal year, and $1.2 trillion racking up for the current year, the treasury secretary, Janet Yellen, said Friday that the debt ceiling would be reached on January 19.To avoid defaulting, the Treasury will take “extraordinary measures” to shuffle around resources. The actual X-date, or D-Day for when America will no longer be able to meet all its obligations in full and on time, is expected sometime in the middle of this year. Before then, Congress must make a decision: Does it want to play the usual game, or does it want to get America’s fiscal house in order once and for all?“We need policymakers on both sides to be starting these conversations now, in earnest, because waiting until the last minute is not a solution,” the director of economic policy at the Bipartisan Policy Center, Shai Akabas, said. Mr. Boyle has introduced legislation to abolish the debt ceiling and give the treasury secretary authority to issue new debt as long as Congress is notified. He said he is willing to work on other bills but two spending requirements are non-negotiable.“Defaulting on our bills is never an option, and neither is slashing Americans’ Social Security and Medicare benefits,” he said.Yet abolishing the debt ceiling without actual changes to budgeting won’t fly with Republicans. In ascending to the House speakership, Representative Kevin McCarthy agreed to demands from House Freedom Caucus members to work on debt reduction and balanced budgets.Among those concessions, the speaker agreed to adopt a fiscal year 2024 budget resolution that would balance the budget within 10 years; alter the budget process and mandatory spending programs; cap fiscal year 2024 discretionary spending at fiscal year 2022 levels or lower; and reject a debt limit increase if it comes without a budget agreement or commensurate fiscal changes. The president of the Club for Growth, David McIntosh, a former Republican congressman, told the Sun that he is urging House conservatives to introduce legislation that would not touch entitlement spending or defense dollars, but would have a trigger for stopping payments for discretionary spending if the Treasury runs out of money and Congress fails to act. He is recommending that lawmakers avoid a “clean” debt ceiling bill that raises the limit without requiring debt reduction solutions. “It’s not a vehicle to get everything you want done, but we can set up a mechanism that will take care of it in the future by setting these priorities,” he said.Mr. Akabas said it’s unlikely that House Freedom or Progressive Caucus members will ever see eye-to-eye on debt reduction and budget changes, but a majority of lawmakers seem to be converging around legislation introduced last session by the new Budget Committee chairman, Jodey Arrington of Texas, a Democratic representative of California, Scott Peters, and others.That bill, which could return this session, would institute changes that encourage debt reduction votes and deliver concurrent budget resolutions to the president by the mandated April 15 deadline. Congress rarely passes concurrent budget resolutions, and when it does, they usually increase the deficit. “We have not seen a fiscally responsible concurrent budget resolution passed out of Congress in decades,” Mr. Akabas said. This bill “is really the only bipartisan proposal that is out there to resolve this definitive issue in any type of sustainable way.” Whatever they choose, Mr. McIntosh said any success will require lawmakers to reject contradictions they have perpetuated for years. “With the debt ceiling, they’re saying, ‘Don’t borrow more than this.’ And then with all the spending bills, they’re saying, ‘Spend, spend, spend,’ and the folks over at the Treasury throw up their hands and say, ‘Which of these two directions do we follow?’”

New Year, New Debt Ceiling Hike, but Can Wiser Heads Prevail?

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