Last week, in a rather dramatic reversal, the House of Representatives suspended the debt ceiling until mid-May. Today, the Senate did the same, resolving the debt-limit fight that had been set for February.
The Senate on Thursday approved legislation that prevents the U.S. from hitting its debt limit until May 19, sending the legislation to President Obama.
In a 64-34 vote, the Senate gave its blessing to a House bill that suspends the debt ceiling until May 19, when the Treasury Department will need to use “extraordinary measures” to keep paying the nation’s bills.
Eleven Senate Republicans sided with the Democratic majority, but 34 rejected the bill, even knowing the outcome. It’s a reminder that while the House GOP has earned a reputation for radicalism, the Senate GOP is plenty extreme – in this case, most House Republicans (85%) voted for the debt-ceiling suspension, while most Senate Republicans (75%) did not.
As we discussed last week, by suspending the debt ceiling, instead of raising it, this bill effectively makes it so that there is no debt limit between now and May 19 – the Treasury will simply be authorized to borrow as necessary between now and then.
Though Democrats ideally wanted an entirely clean bill, this measure, which is now headed to the White House for President Obama’s signature, was approved with the expectation that Congress will pass a budget by April. And if lawmakers fail to do so? Under the plan, Congress won’t get paid.
While that might make some folks feel better about what’s transpired, it doesn’t change the fact that Republicans took the debt ceiling hostage, then let the hostage go in exchange for practically nothing.
Remember, it was earlier this month that Republicans had a vague-but-consistent position on the debt ceiling. They knew it would have to be raised by mid-February, but before GOP members would honor their obligations, they would demand that Democrats accept over $1 trillion in spending cuts. Under the Republican plan, no ransom meant no deal.
This strategy imploded in ways that have not yet been fully appreciated. Under pressure from the business community, and with President Obama holding firm, GOP leaders collapsed like a house of cards.
But what happens when the debt ceiling needs to be raised again in May? In theory, we could see the same crisis begin anew, with Republicans once again taking the nation hostage and threatening to crash the global economy unless their demands are met, but I’m skeptical.
The key takeaway from this resolution is that GOP leaders, for all the bluster and chest-thumping, do not want to force the nation to default on its obligations. They know the consequences would be catastrophic; they know they’d get the blame; and they don’t want to go down in history as the lawmakers to hurt the nation on purpose.
And once default is off the table, the implicit debt-ceiling threat is no longer credible. Republicans had a bad hand, played it poorly, and forfeited their leverage in the process.