Senator Mitch McConnell has sent a message to Americans increasingly worried that the economy will collapse if the federal debt ceiling is not raised: “Calm down.”
“Look, I think everyone needs to relax,” McConnell, a Kentucky Republican and minority leader with extensive experience in the debt ceiling battle, told reporters returning home earlier this week. Told. “Whatever is said about the daily talks, the president and chairman will come to an agreement. It will eventually pass in both houses of Congress with bipartisan votes. This country will not default.”
That may be easier said than done. With McConnell, President Biden and House Speaker Kevin McCarthy repeatedly assuring the American people there will be no default, there is just over a week left before the Treasury is expected to run out of cash to pay. and its guarantees are becoming somewhat precarious. that duty.
Even if negotiators agree to a deal soon (a result that seemed within reach but had yet to materialize as talks continued on Friday), there is still much work to be done. At the very least, it will need approval from the House and Senate. The outcome is far from certain, given the growing anxiety and some outright opposition on both the right and the left. At this point, no one can be absolutely sure that the US will not fall off the cliff of default, even if no one in the world wants it to. Time is short.
“No one can guarantee that there will be no default, except that time is ticking pretty fast here,” said longtime Republican Budget Committee chairman and now Senior Vice President G. Mr Hoagland said. At the Bipartisan Policy Center. “We are on thin ice in a big way.”
Negotiators breathed a sigh of relief on Friday afternoon when the Treasury Secretary announced that the default deadline would be moved to June 5, four days later. But it will still be difficult for Congress to act by then, and a short extension could be counterproductive and even exhausting for some. the urgency of concluding a contract;
McCarthy’s chief negotiator, North Carolina Republican Rep. Patrick T. McHenry, said, “We’re in the frame where we can do this, and we have to come to terms on very tight terms this closing hour.” won’t,” he said. “We are going back to the final key issues and have not yet resolved them.”
Since the impasse began, Biden and congressional leaders have tried to assuage fears that a default might occur, basically saying a default is unthinkable because Congress has so far narrowly avoided a default. have said to After one of his high-level meetings at the White House, New York Democratic Party Majority Leader Chuck Schumer welcomed the fact that all four leaders said default was out of the question.
Part of their motive for providing this constant reassurance was to strengthen their country’s power, keep the public calm, and prevent financial market turmoil as negotiations protracted.
But President Biden changed his stance a bit during a trip to Japan last weekend, saying for the first time that a default might ultimately be an option if Republicans insisted on taking the issue to the end.
“I can’t guarantee that they won’t go out of their way to force a default,” Mr. Biden told reporters. “I can’t guarantee that.”
Minority leader New York Democrat Rep. Hakeem Jeffries expressed similar sentiments this week when asked if he was confident the government would not default on its debt.
Referring to Republicans, he said, “This group doesn’t,” noting that some Republicans don’t mind the financial turmoil from defaults if they think it will help them politically in 2024. I doubt that.
House leader McCarthy, a California Republican, has also reiterated that there will be no default and stressed that he believes there will be a positive outcome on Friday.
“I’m a total optimist,” he told reporters as negotiations continued without any apparent progress.
McCarthy said one way a default could be avoided is by signing the bill passed by Republicans in the House that raises the debt ceiling while making significant budget cuts and curtailing other policies of the Biden administration. . But even if Treasury funds run out, that’s unlikely to happen. McCarthy also ruled out an emergency short-term suspension of the debt ceiling.
Even if House Republicans and Mr. Biden reach a deal, the drama won’t end. In some ways it will only be the beginning.
House Republicans have set a 72-hour time frame between the publication of a bill and a vote, bringing the showdown closer to the Treasury Department’s early June deadline.
Moreover, with the far-right Republican convention joining progressive Democrats and reluctance for the deal to take shape, McCarthy and Jeffries needed the necessary votes from both sides to get the deal approved. You may need to thread the eye of a needle to collect. .
McCarthy and his leadership team need to be very accurate in assessing how many Republicans will vote in favor of a final budget with a higher debt ceiling. Next, at least 218 members of Congress must let Jeffries know how many votes Democrats need to support the bill.
Miscalculations can lead to catastrophe. In September 2008, as the country plunged into a disastrous financial crisis, the House of Representatives surprised the Bush administration by failing to pass a bank bailout program. Things were in turmoil on the House floor, and the bill failed as many Republicans refused to endorse it despite the president’s pleas, and some Democrats did as well. The stock market fell in real time as the vote unfolded. Four days later, shaken congressmen returned and approved the proposal with a few changes.
Some speculate that a similar scenario would be required to pass a debt consolidation plan through Congress. In other words, a failed vote and a drop in markets would highlight the economic impact of a default and prompt lawmakers to act. Given the potentially serious consequences of even short-term defaults, some would prefer that not to happen.
“I’ve been optimistic that it won’t happen, but the longer things go on, the more likely it seems,” said Mr. Hoagland, a budget expert. “We’re running out of time to get this done, but we can only hope we don’t default.”
Luke Broadwater contributed to the report.
