The federal government is probably less than a month away from an economically catastrophic default.
Regardless of who bears the political responsibility for the default, the Vice Presidential Advisor admits he has a lot to lose if the country hits a recession as President Biden moves toward his re-election campaign. .
Biden has several strategic options to try and prevent that. All have been the subject of debate within the administration and with Democratic allies in recent weeks. They are not tied to the Republican Party effectively circumventing the national debt ceiling and preparing for unilateral action to keep paying the national bills and continue to hold out to raise the national debt ceiling. It has a wide range from
Some include negotiations with Republican leaders, which Mr. Biden would argue is irrelevant if anything to do with the debt ceiling.
Each path carries risks, but government officials personally admit it.Biggest is economic disaster: White House economist warned Analysis released Wednesday If the country were to default on its debts for several months, the economy would plunge into recession and 8 million jobs would be lost.
The economists also said that the mere approximation of a possible default would shake markets, raise borrowing costs across the economy, and create “productive investments essential for companies to self-finance and extend their current expansion.” It interferes with the ability to engage in
As Biden’s aides and allies see it, here are the avenues available to Biden:
stay on course
For months, Mr. Biden has argued that the nation’s borrowing ceiling must be raised without conditions so that the U.S. can afford the spending approved by Congress. Many progressives urged him to do so, so he refused to negotiate and was able to continue doing so.
House Republicans would pass a bill that combined raising the cap and cutting federal spending, upending Biden’s climate agenda. Biden would, in effect, boldly challenge California House Speaker Kevin McCarthy to allow the government to run out of cash to pay the bill on time.
The risk McCarthy refuses to give in is that he pointed to legislation passed last week by the House of Representatives as evidence that Republicans have taken sufficient steps to raise the debt ceiling. Biden is relying on pressure from business groups and financial market turmoil to force Republicans to turn a blind eye at the last minute and pass legislation to avoid at least weeks or months of default. But so far, House Republicans have shown no intention of passing such a bill, known as a “clean” debt ceiling hike. Neither has the critical mass of Senate Republicans needed to advance the bill in that House.
negotiate spending cuts that aren’t tied to the debt ceiling
Biden is expected to welcome McCarthy and other congressional leaders to the White House next week to discuss fiscal policy. The President says these negotiations are decoupled from the debt ceiling, but in fact they are not.
The deadline for the talks is the so-called X-date, which is estimated to be June 1. Biden’s invitation to congressional leadership has been accelerated by a revised prediction of when that date will be. By contrast, the bill that Mr. Biden signed into law late last year to fund federal operations runs until the end of September.
By trying to broker an agreement early on next fiscal year’s spending levels, before the X-date, Mr. Biden was able to negotiate without “negotiating”. commits to pass the full extension of
Business groups and even some government officials expect a deal of that nature to center on limits on federal discretionary spending, though almost certainly not as draconian as legislation passed by Republicans. White House officials have privately said for months that they do not expect the House to approve a significant increase in spending next year.
The risk to that strategy is that McCarthy’s most conservative members are unwilling to trade in that range. Mr. Biden will not accept the more drastic demands of these members. This complicates the prospect of agreements being executed through speakers.
Bypass McCarthy
Mr. Biden could bypass the Speaker and lobby a small number of moderate Republicans in the House and Senate to seek higher limits, offering some financial concessions as a temptation. Bringing such a deal to the House of Representatives could require legislative action like the so-called discharge petition that Democrats have been prepping for months.
It may also require a different approach to Republican lawmakers Biden needs to pass such a bill. Moderate Republicans in the House say they have received little friendly support from the White House so far. I happily smacked them for voting to move forward with the cuts.
This week, administration officials repeatedly posted pictures and names of House Republicans on Biden’s official Twitter account, accusing him of voting to cut funding for veterans’ programs and Meals on Wheels. Two of the lawmakers featured were members of the leadership, including Mr. McCarthy. Both were high-profile far-right MPs. More than 20 of his remaining were lawmakers in the seats Mr. Biden won in his 2020.
Officials defend the strategy. White House Budget Director Shalanda Young told reporters on Thursday after criticizing the budget cuts included in the Republican bill, “I hope we find a way around the default.” But our job is to go see you, the American people, and make sure people understand what this debate is about.”
go alone
If the tactics chosen by Mr. Biden fail to sign a bill that raises the debt ceiling by date X, the president will either allow the country to default or effectively end the constitutional ban on the borrowing ceiling. You will be forced to choose whether to pursue your objection. When the government runs out of cash, it continues to borrow to pay bills.
The challenge is rooted in a 14th Amendment clause that stipulates that the government must pay its debts. Administration officials have debated the idea for months without a solution. The move would soon be challenged in court, sow at least temporary uncertainty in bond markets, and send government borrowing costs skyrocketing.
Katie Edmondson contributed to the report.
