Joe Biden was vice president when Barack Obama negotiated an end to the last debt ceiling crisis by agreeing to cut $1 of spending in exchange for every $1 increase in the debt limit. At the time. the debt limit was $14.3 trillion (Ah…the good old days), and Obama agreed to $917 billion in spending cuts over 10 years while the GOP agreed to raise the debt limit by $900 billion.
Republicans point to the debate and 11th-hour deal on the debt limit as evidence that nothing bad will happen if the debt limit is breached. The markets gyrated wildly, and, for a brief time, one credit rating agency dropped the rating of U.S. government bonds.
But Republicans forget that, for months after the debt limit deal, the government incurred unnecessary costs.
GAO estimated that delays in raising the debt limit in 2011 led to an increase in Treasury’s borrowing costs of about $1.3 billion in fiscal year 2011. However, this does not account for the multiyear effects on increased costs for Treasury securities that will remain outstanding after fiscal year 2011. Further, according to Treasury officials, the increased focus on debt limit-related operations as such delays occurred required more time and Treasury resources and diverted Treasury’s staff away from other important cash and debt management responsibilities.
OK, so not exactly painless. And what happens if we actually breach the debt limit this time — even if only for a few days — is an argument in which no one really wants to be proved right or wrong.
This time around, Biden thinks he can force Republicans to blink without negotiating or agreeing to anything. He’s confident that by not doing anything, Republicans will panic and raise the debt ceiling with no commitment from Biden to cut spending or anything else for that matter.
Klain said the White House’s plan was straightforward, according to the lawmaker: Refuse to entertain any concessions, and launch a barrage of attacks highlighting the GOP position that would force Speaker Kevin McCarthy (R-Calif.) to fold.
“This debate is simple: We want to do the responsible thing, and they want to take the entire American economy hostage to cut Social Security and Medicare,” said the member of Congress, speaking on the condition of anonymity to reflect private conversations. Klain told the lawmaker that the fight could result in substantial political benefits for the Democratic Party. “The point he was making was clear: You can’t negotiate with people who take hostages.”
This has been the radical left’s position from the beginning. Refuse to negotiate, and if the economy detonates, blame it on Republicans. In 2011, the hard left was apoplectic when Obama agreed to deal with the Republicans. Biden is not going to make the same “mistake.”
House Republicans have increasingly signaled that they will force a showdown with the administration over the nation’s debt ceiling, which sets a statutory limit on how much the federal government can borrow. The Treasury Department said Thursday that the government has hit the current $31.4 trillion limit, and it’s now undertaking complex financial maneuvers so that federal agencies can operate — and bills can be paid — without borrowing more. That will work until sometime this summer, but at some point, Congress will need to raise or suspend the debt ceiling, or the United States will default on its obligations for the first time, undermining the full faith and credit of the U.S. government and potentially causing a global economic shock.
Many GOP lawmakers have said that they will not approve a debt ceiling increase without cuts to spending programs that the Biden administration has vowed to protect, creating an impasse with no clear resolution.
The Republicans are perfectly willing to negotiate — a precedent that’s been around for at least 30 years going back to 1995. Biden now proposes to do away with precedent to please his rabid left-wing base, who sees negotiation as surrender and prefer putting its boot on the neck of the GOP and bending it to its will.
It’s not going to happen. And before too long, Biden will realize that negotiations are the only answer, or he and his party will leave themselves wide open to shouldering the blame for whatever happens if the debt ceiling is breached.
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