Why Does Congress Keep Playing Chicken With the Debt Ceiling?

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On Thursday morning, with only 11 days left to go, Senate leaders broke a stalemate to prevent — temporarily — the United States government from crashing through the debt ceiling, a self-imposed legislative limit that on Oct. 18 would have triggered a default on the $28.4 trillion in U.S. Treasury securities that form the foundation of the global financial system.

If that sounds like a fearsome prospect, it’s because it is: The devastation of a default, one prominent economist predicted, would be “substantially worse” than what followed the collapse of Lehman Brothers in 2008. In the United States alone, six million jobs and $15 trillion in wealth could be wiped out. “Mortgage payments, car loans, credit card bills — everything that is purchased with credit would be costlier after default,” Treasury Secretary Janet Yellen warned last month.

Congress appears to have averted that crisis for now, but only by punting it to early December. Why did the country come so close to an unnecessary economic crisis, and how can it be avoided two months from now? Here’s what people are saying.

Why do we have a debt ceiling anyway?

As my colleague Clay Risen explained, the debt ceiling is a century-old, artificial limit on how much the United States may borrow to fund its spending commitments, a limit that Congress could do away with but has stuck around as a political football. “Raising the limit used to be a bipartisan nonevent,” he wrote. “But, like everything else in Washington over the last 15 years, it has been sucked into the tornado of no-holds-barred politics.”

In 2006, Democrats, including then-Senator Joe Biden, refused to support a debt-limit increase as a protest against the Bush administration’s war in Iraq and tax cuts.
In 2011 and two years later, congressional Republicans tried to use support for raising the debt limit as a bargaining chip to force Democrats to make spending cuts.

But this time around, Republicans have obstructed the process with a recalcitrance they hadn’t shown before: Observers inside and outside Washington were worried neither side would budge before the Oct. 18 deadline, “roiling financial markets and capsizing the economy’s nascent recovery from the pandemic downturn,” The Times’s Jim Tankersley reported.

The four options for avoiding default in December

Hold a bipartisan vote: With just 10 votes from Senate Republicans, Congress could suspend or raise the debt ceiling for a year or longer. But Republicans, led by Mitch McConnell, have been filibustering Democratic attempts to do so, and he signaled they would renew their blockade in December. If the Democrats want to spend trillions of dollars on President Biden’s agenda, Republicans argue, they should raise the debt limit themselves.

Use the reconciliation process: Through a procedure known as budget reconciliation, Senate Democrats could circumvent the filibuster, which requires at least 60 votes to break, and increase the debt ceiling with a simple party line vote. But there are a few reasons Democrats have been loath to do so:

The process arguably shouldn’t be necessary: During the Trump presidency, Democrats voted with Republicans three times to raise or suspend the debt limit, even though they opposed the 2017 Republican tax cuts that contributed to the debt, so they say Senate Republicans should repay the favor under Biden.
The process could take too long: It would require close coordination between the House and Senate and would also allow for a vote-a-rama, or period of unlimited amendments, which Republicans would likely use to embarrass Democrats, as Ed Kilgore explained in New York magazine. But with the short-term extension, McConnell said, Democrats should “have plenty of time” to use reconciliation.
The process is seen as politically risky: Reconciliation might require Democrats to specify a new number for the debt ceiling rather than just suspend it, which some members fear could create fodder for Republican attack ads during the midterm election season, Bloomberg’s Mike Dorning reported. Many commentators have dismissed this as a flimsy excuse.

Reform the filibuster: As my colleague David Leonhardt explained, the filibuster is a Senate tradition, not a law, and a majority of senators can reform or end it at any time, as the chamber already has for judicial nominations.

Biden called the option “a real possibility” on Tuesday. But a couple of Senate Democrats — Kyrsten Sinema of Arizona and Joe Manchin of West Virginia — have staunchly opposed making changes to the filibuster, and on Wednesday, Manchin said he would not change his stance now.

Mint a $1 trillion coin: The Times columnist Paul Krugman argued that the Biden administration could simply ignore Congress. “There’s a strange provision in U.S. law that empowers the Treasury secretary to mint and issue platinum coins in any quantity and denomination she chooses,” he explained. “So on the face of it, Janet Yellen could mint a platinum coin with a face value of $1 trillion — no, it needn’t include $1 trillion worth of platinum — deposit it at the Federal Reserve and draw on that account to keep paying the government’s bills without borrowing.”

Yellen, however, dismissed the idea as “a gimmick,” equivalent to “asking the Federal Reserve to print money to cover deficits that Congress is unwilling to cover by issuing debt.”

Do we really need a debt ceiling?

Many people across the political spectrum don’t think so. “The chief problem with the debt ceiling is that it is divorced from actual decisions on spending and taxation, which happen during the budgetary process,”Samanth Subramanian argued in Quartz. “Congress first approves government spending via its budget; then, months later, the debt ceiling battles begin, when legislators snatch the opportunity to call into question expenditures that have already been endorsed.”

Most other countries don’t do this. Rather, they negotiate spending during the budget process itself. “Most countries’ legislatures don’t involve themselves one bit in debt issuance,” Philip Wallach, a senior fellow at the American Enterprise Institute, told Subramanian. “They make spending and tax decisions, and then tell their treasuries: ‘Now you go find out how to fund the government.’ I don’t think that’s crazy at all.”

There are many pathways to getting rid of the debt ceiling permanently, as Dylan Matthews wrote in Vox. David Super, a Georgetown Law professor and congressional procedure expert, argued it could be done through reconciliation. Others have suggested raising the ceiling to an effectively unreachable number, like “a quadrillion googolplex dollars.”

“The debt limit serves no purpose, is not a brake on spending and just allows for financing of existing obligations,” David Dayen of The American Prospect wrote. “No one way of putting it out of its misery is any better than the other. But the grave for the debt limit must be dug.”

Do you have a point of view we missed? Email us at [email protected]. Please note your name, age and location in your response, which may be included in the next newsletter.

READ MORE

“What the Debt Ceiling Means for Social Security and More” [The New York Times]

“Senate Democrats Weigh ‘Nuking’ Filibuster for Debt Limit Bill” [Roll Call]

“The Debt-Ceiling Debate Is Out of Control. Here’s How to Stop the Madness.” [The Washington Post]

“Trillion-Dollar Platinum Coin Could Be Minted at the Last Minute” [Axios]

“What a Trillion-Dollar Coin Can Teach Us” [The New York Times]

Interested in exploring how race and language shape our politics and culture? Join John McWhorter and Jane Coaston for a discussion — and a special live performance — at this virtual event on Thursday, Oct. 14, for Times subscribers only. R.S.V.P. here to attend.

WHAT YOU’RE SAYING

Here’s what readers had to say about the last debate: Should we get rid of Facebook?

Jesse: “I am a 31-year-old male who lives in Milwaukee and am currently in recovery for an eating disorder fueled by body dysmorphia. Reading about the teenage girls who also suffered from body image issues because of Instagram made me view my feed in a whole new light. The advertisements I was receiving were reinforcing my insecurities and offering me ‘solutions’ to fix my perceived issues. I thought Instagram was helping me, as I was following a lot of body positive accounts. However, the relentless advertising was definitely driving my dysmorphia. Yesterday I engaged in the cumbersome deactivation process of Instagram, and I hope to soon find peace.”

Stephanie: “I’m done with Facebook’s core social media product, which soured relations with family over politics. But I still use my profile for secondhand goods — giveaways and requests from the local buy-nothing group and marketplace, rather than buying new. I use Instagram for business and activism. I talk with family overseas using Messenger. If I could do these thingsnot on Facebook, I would.”

Mike [responding to the argument by Kate Klonick, an assistant professor at St. John’s University Law School, that a better organizing principle for Facebook’s business model “might entail measuring the good things Facebook offers, not just the bad”]: “Who, however, gets to define ‘good’? Is it a good thing if a user decides to attend a Black Lives Matter protest or if a user decides to attend a Proud Boys one?”