SPOKANE — As the U.S. government on Thursday hit its self-imposed borrowing limit, Northwest lawmakers signaled the country could be in for a long fight in Congress over raising the debt ceiling that risks economic catastrophe if the parties don’t reach a deal on federal spending.
In a letter to congressional leaders, Treasury Secretary Janet Yellen said she would use “extraordinary measures” to delay a default after the federal debt reached the limit of $31.4 trillion Congress imposed in December 2021, when lawmakers last raised the ceiling. By shifting money around, Yellen estimated the government could pay its bills until the middle of 2023, but she said exactly how long those delay tactics last “is subject to considerable uncertainty.”
In past years, hitting the debt ceiling has at times prompted Democrats and Republicans to negotiate cuts to federal spending while raising taxes to get closer to a balanced budget, such as in the 2013 deal struck by Sen. Patty Murray, D-Wash., and then-Rep. Paul Ryan, R-Wisc.
But now, a hardline faction in the House GOP majority is threatening to block legislation to raise the debt limit unless it includes sharp cuts to federal spending, while ruling out tax hikes. President Joe Biden and his fellow Democrats who hold the Senate majority have dismissed those demands, setting up what could be a protracted standoff.
Murray, who now holds the federal checkbook as chair of the Senate Appropriations Committee, said Thursday lawmakers need to raise the debt limit “without any strings attached,” pointing out that Republicans did so three times under former President Donald Trump.
“Here’s the bottom line: the full faith and credit of the United States should never be held hostage to score political points, as many Republican lawmakers are trying to do,” Murray said in a statement. “House Republicans choosing to block our efforts would have catastrophic consequences for our entire economy that would hurt everyone, especially working people and middle-class families.”
Rep. Russ Fulcher, who represents North Idaho, is a member of the House Freedom Caucus, a group of Republicans who generally favor cutting federal spending and oppose tax increases. In a statement Thursday, he said he would not support raising the debt limit without “serious spending reforms that set us on a path to a balanced budget.”
“Unless we fix the federal government’s addiction to spending, we will continue to find ourselves in these crises,” Fulcher said. “We now have an opportunity to address this growing economic and national security threat, yet President Biden is refusing to negotiate with Republicans. We should call this position out for what it is: extreme.”
It’s been more than two decades since the federal government spent less money than it collected, in fiscal year 2001. That’s happened just five times in the past 50 years. Instead, the government has borrowed vast amounts of money by selling U.S. Treasury Bonds to investors around the world. In the past, both parties have typically approved more borrowing to finance their priorities, with Republicans cutting taxes and Democrats spending more on federal programs.
The last major fight over the debt limit came in 2011, after a wave of “Tea Party” Republicans was elected on promises to slash federal spending. But the GOP raised the debt limit as it prioritized tax cuts over a balanced budget under President Donald Trump, who approved $4.7 trillion of additional debt even before the COVID-19 pandemic prompted a dramatic increase in federal spending.
The deficit hit an all-time high of more than $3.1 trillion in fiscal year 2020, as the Trump administration ramped up spending to combat the pandemic’s effects. The deficit fell to below $1.4 trillion in fiscal year 2022 as many of those programs expired, and as of Thursday the federal government had spent $421 billion more than it had collected in revenue during the fiscal year that begin last October.
Louise Sheiner, policy director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, a nonpartisan think tank in D.C., said failing to raise the debt ceiling wouldn’t actually mean the government is living within its means — that’s something Congress determines through its annual appropriations process. Instead, she said, it would be akin to not paying a credit card bill.
“There’s no way around it but to lift the debt ceiling,” said Sheiner, a former Treasury Department official. “And so the only question is: How do we get there and how much damage is done in the process?”
The U.S. government defaulting on its debt could roil global markets, she said, which rely on U.S. Treasury bonds being the safest investment in the world. Even if Congress eventually raises the borrowing limit in time to avert a default, the threat of such a catastrophic event could spook investors and cause the stock market to crash.
Rep. Cathy McMorris Rodgers, a Spokane Republican who chairs the powerful House Energy and Commerce Committee, took a measured tone in a statement Thursday, saying she would “thoughtfully consider any legislation to raise the debt ceiling while continuing to advocate for a balanced budget and fixing a broken budget process so we can get off this one way street towards a fiscal cliff.”
“Congress has maxed out the taxpayers’ credit card and continues to write checks it can’t cash,” she said. “On top of that, the current budget process is broken, unsustainable, and jeopardizes our economic security. I know there are serious implications to defaulting on the nation’s debt, but I also believe we cannot ignore the reckless spending that got us into this mess.”
Some have proposed eliminating the debt ceiling altogether, a move that so far hasn’t drawn broad support in Congress, or suggested President Joe Biden could simply ignore it — or even mint a $1 trillion coin to make the limit moot. But others argue the limit forces lawmakers to have tough conversations about the nation’s budget.
“I don’t think we should ever be playing chicken with the full faith and credit of the U.S. government, but the existence of the debt ceiling has historically been helpful to give us an opportunity to take stock of our fiscal situation,” said Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget, a nonpartisan group that advocates for a balanced budget.
In the 1980s and ‘90s, Goldwein said, hitting the debt limit prompted bipartisan reforms that improved the country’s fiscal health. While getting to a balanced budget even within a decade “would be practically impossible” in light of the drastic spending cuts and tax increases that would require, he said, the ideal outcome would be a deal between the parties that turns the government toward better long-term fiscal health.
“But that’s really different from actually threatening default, which would be a huge mistake,” Goldwein said. “We absolutely have to raise or suspend the debt limit — that should not be negotiable — but we also have very real fiscal problems.”
Time will tell if Republicans and Democrats can work together to address those problems, and indeed whether a majority in either party genuinely cares about them when they are in power and in a position to finance their own priorities by racking up more debt.
