About a month ago, Treasury Secretary Janet Yellen testified to Congress that lawmakers must raise the debt ceiling to avoid "catastrophic consequences." The cabinet secretary, who also served as the chair of the Federal Reserve, added, "I would plead with Congress simply to protect the full faith and credit of the United States" by addressing the issue before lawmakers' summer break.
Republicans heard Yellen's appeal, but they're choosing to ignore her. Punchbowl News reported this morning:
Senate Minority Leader Mitch McConnell is taking a very hard line on the debt ceiling. His message -- if Senate Democrats want to raise the debt ceiling, they're going to have to do it themselves because no Republicans will vote for it in the current "environment" on Capitol Hill. "I can't imagine there will be a single Republican voting to raise the debt ceiling after what we've been experiencing," McConnell told [Punchbowl News' John Bresnahan] on Tuesday night in the Capitol.
A few hours earlier, Sen. Lindsey Graham (R-S.C.) said he intends to present the Democratic majority next week with the GOP's demands. In effect, the South Carolinian is preparing a ransom note: if the governing party wants to prevent a global financial crisis, it'll have to pay Republican hostage-takers.
Circling back to our earlier coverage, none of this is coming out of nowhere. Indeed, one of the first signs of trouble came back in March.
Politico reported that congressional Republicans, outraged that Democrats had the audacity to pass a COVID relief package that the GOP didn't like, were "plotting" their "payback." To punish Dems for governing without them, "several" GOP senators were "lining up against raising the debt ceiling."
NBC News reported a month later that National Republican Senatorial Committee Chair Rick Scott (R-Fla.) was leading the push. The same day, the Washington Post moved the ball forward, noting that Senate Republicans held a private discussion on the party's strategy for the coming months, and signaled a willingness to "oppose any future increase to the debt ceiling unless Congress also couples it with comparable federal spending cuts."
I'm mindful of the fact that many normal people probably forget the key elements of this issue, so let's revisit our Q&A.
Wait, do we really have to talk about the debt ceiling again?
I'm afraid so. No one wants to have this conversation -- now or ever -- but Senate Republicans are picking the fight, so it's important for the public to understand what's at stake.
Fine. It's been a decade since I last thought about this, so you might as well refresh my memory and tell me what the heck the debt ceiling is.
In our system of government, Congress has the "power of the purse" and appropriates federal funds, but it's the executive branch that actually spends the money. For the most part, this works relatively smoothly, though there's an important sticking point: the executive branch lacks the legal authority to spend more than the country takes in.
Since the United States nearly always runs an annual budget deficit, this means administrations have spent decades going back to Congress and asking lawmakers to extend the nation's borrowing limit -- in effect, getting permission to spend all of the money lawmakers already allocated.
This model seems badly flawed.
It is. In fact, no major economy on the planet operates this way.
What happens if the United States fails to extend its borrowing authority?
Nothing good. Failure would result in the world's largest economy defaulting on its debts and obligations, which would likely spark a global crisis. It's precisely why Secretary Yellen warned lawmakers of "catastrophic consequences."
But for most of modern history, this hasn't made much of a difference, right?
Right. Lawmakers in both parties have occasionally used the process of raising the debt ceiling for grandstanding, but neither party had ever seriously entertained the possibility of trashing the full faith and credit of the United States government.
And then Republicans won control of the U.S. House in the 2010 midterms, and got to work launching a first-of-its-kind debt-ceiling crisis in 2011. GOP lawmakers told the Obama White House that they would refuse to extend the nation's borrowing limit -- which is to say, refuse to cover the debts the nation had already accrued -- until Democrats met the Republican Party's non-negotiable demands.
You make it sound as if GOP elected officials held the nation hostage.
Because they did. In fact, Mitch McConnell himself described his party's tactics as a "hostage" strategy at the time. Soon after, then-Vice President Joe Biden reportedly told congressional Democrats, in reference to GOP lawmakers, "They have acted like terrorists."
What was it, exactly, that Republicans included in their hostage ransom note?
Then-House Speaker John Boehner (R-Ohio) came up with what he called the "Boehner Rule": Any debt-ceiling increase would have to be tied to a dollar-for-dollar spending-cut agreement. In other words, if Congress had to raise the limit by $1 trillion, then the Democratic administration would have to agree to $1 trillion in spending cuts. A $2 trillion increase to the debt ceiling would require $2 trillion in cuts. And so on.
That sounds familiar.
It should. Though the Boehner Rule eventually disappeared -- it was a mindless post-policy gimmick, which was based on total gibberish -- it's the same idea many congressional Republicans are pushing now.
When GOP lawmakers created this crisis in 2011, did it really make a difference?
Yes. The fact that Republicans were prepared to crash the global economy, on purpose, did not go unnoticed. Just as the nation was finding its footing after the Great Recession, the GOP's debt-ceiling crisis slowed job growth in the United States to a crawl, did real harm to the nation's global reputation, and led to the first-ever downgrade to our debt rating.
Why didn't Republicans pay a price for engaging in such scandalous tactics?
Largely because it wasn't treated as a scandal. Much of the Beltway media covered the story as just another fiscal fight between Democrats and Republicans. GOP lawmakers got away with creating a deliberate crisis, threatening to hurt Americans on purpose unless their demands were met, but there wasn't even a hint of accountability for the perpetrators. It's likely why Republicans feel comfortable giving this another try now.
So why has it been a decade since I last heard about this?
Because when Republicans tried to launch additional debt-ceiling fights after 2011, then-President Barack Obama drew a line in the sand from which he did not deviate: he would not negotiate with those threatening Americans with deliberate harm. GOP lawmakers made post-2011 threats, and put together ransom notes, but when the Democratic White House refused to engage, Republicans ultimately had no choice but to approve clean debt-ceiling increases.
And what about during the Trump era? Did Democrats try to borrow a page from the GOP's playbook?
No. During Donald Trump's term -- a four-year period in which Republicans forgot to pretend to care about the deficit and spending concerns -- Congress raised the debt ceiling three times without incident. Two years ago, Trump went so far as to declare, "I can't imagine anybody using the debt ceiling as a negotiating wedge." The Republican went on to describe the debt limit a "sacred thing in our country."
Evidently, the GOP has changed its mind now that there's another Democratic president.
What's to stop President Biden from taking the same line Obama took, telling Republicans he simply won't negotiate with anyone -- foreign or domestic -- who threatens Americans' wellbeing?
Biden may very well do exactly that, and by any fair measure, it would be the smart move. For now, all we've heard from the White House is that the president "fully expects that Congress will meet its obligations as it did on a bipartisan basis three times during the Trump Administration and amend the debt limit law as needed."
Things are about to get interesting. According to the Treasury Department, there's a July 31 deadline, but that's not the real deadline -- it's just the point at which officials have to start moving money around in order to cover our fiscal obligations. The drop-dead deadline will come later, probably in a couple of months.
Between now and then, the fact that several Senate Republicans are already plotting such a politically violent threat needs to be taken seriously. Democrats may control the House and Senate, but GOP senators can filibuster a measure to raise the debt ceiling.
And if they do?
Democrats can (a) try to find 10 Senate Republicans willing to do the right thing, (b) use the reconciliation process; or (c) overhaul the filibuster rules. Indeed, another GOP debt-ceiling crisis would offer powerful evidence to reform advocates, reminding Democratic skeptics that the existing rules have the potential to be literally dangerous to the nation's economic health and stability.
Watch this space.