U.S. Congress could be in for bruising debt-ceiling fight after midterms
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[October 10, 2022]
By Richard Cowan and David Morgan
WASHINGTON (Reuters) - If Republicans win
control of the U.S. House of Representatives in November's midterm
elections, they expect to use a powerful and potentially dangerous tool
as leverage in their dealings with Democratic President Joe Biden: The
federal debt ceiling.
The U.S. Treasury is expected to reach its mandated $31.4 trillion
borrowing limit in 2023, and Republicans ranging from hard-line
conservatives to moderates see that as an opportunity to curb Biden's
spending on Democratic initiatives such as climate change and new social
programs.
"It's critical that we're prepared to use the leverage we have," said
Representative Scott Perry, chairman of the hard-line House Freedom
Caucus, which could see greater influence if Republicans win control in
the Nov. 8 election, as nonpartisan election forecasters say is likely.
Representative Buddy Carter, a contender for House Budget Committee
chairman, said the debt ceiling would be key to a new Republican
majority's hopes of reining in federal spending.
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"Getting people's attention about our debt is very difficult. The debt
ceiling is going to be an important tool," Carter told Reuters.
Congress created the debt ceiling in 1917 to give the government greater
borrowing flexibility, and must approve each increase to ensure that the
United States meets its debt obligations and avoids a catastrophic
default.
The system, in theory, is meant to control the rise in the nation's
debt, but has not been an effective tool in recent decades. Washington's
debt swelled from $3.2 trillion in 1990 to $31.1 trillion today.
But the approach has set the stage for regular flashpoints, with
Republicans regularly threatening to block an increase to exact
concessions.
One such effort in 2011 led to a budget-cutting agreement. But others
failed to defund the Affordable Care Act in 2013 or complete
construction of a wall along the U.S.-Mexico border during Donald
Trump's administration.
There have also been harrowing consequences. The protracted 2011
standoff in Congress prompted Standard & Poor's to downgrade the U.S.
credit rating for the first time, sending financial markets reeling.
The risks are arguably higher now, as global economies flirt with
post-pandemic recessions and a looming European energy crisis.
Republicans approved additional spending during former President Trump's
years in power, but following Biden's election returned to their focus
on the deficit.
Republican Senator Bill Cassidy, a moderate, told Reuters that the debt
ceiling would allow Republicans to "take the credit card away" from
Biden.
Democrats say they have no illusions about what could lie ahead.
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An American flag flies outside of the
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"I not only have fears if the Republicans ... take over the House, I
have nightmares," said Democratic Representative James McGovern. "I
try not to think about it," he said referring to a possible debt
limit battle.
'EXTENDED DEBATE'
Debate about the debt ceiling could flare again early next year,
after the new Congress is sworn in.
Sometime in the first quarter of 2023 the nation's line of credit is
likely to be exhausted, said Shai Akabas, director of economic
policy at the Bipartisan Policy Center.
The Treasury Department can take "extraordinary" steps to stave-off
a default until the summer or even longer, depending on revenues and
the economy.
"There is likely to be an extended debate" on the debt limit next
year no matter who wins the midterms, said Akabas, who has seen
several such battles waged. However, with a Republican-controlled
House, "That perhaps makes negotiations a bit tougher," he added.
The last standoff came in December 2021, when Congress raised the
limit to its current $31.4 trillion only after a bitter fight in
which Republicans protested Biden's domestic spending agenda.
Senate Republican leader Mitch McConnell, who vowed to avoid
default, finally cut a deal allowing an increase and has since faced
blowback from hardliners including former President Trump, who
claims he knuckled under to Democrats.
"He is their lapdog! He didn't stop trillions of dollars in spending
by refusing to use the debt ceiling as a negotiating tool," Trump
said just last month.
McConnell avoided answering a question about the 2023 debt limit
debate, saying: "We haven't even finished 2022 yet."
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Some lawmakers want to free the country from chronic whiplash over
borrowing by overhauling the process. Among the ideas are a new,
multi-step plan for Congress and the president acting in tandem,
while fostering debate on debt-reduction.
Senator Tim Kaine and fellow Democrat Jeff Merkley "shopped around"
a bill last year that would allow the president to raise the limit
while giving Congress an opportunity to overrule it.
A bipartisan bill has also been floated in the House.
"It's likely we will be on another collision course unless there is
a dynamic shift, or Congress implements a change," predicted Akabas,
whose Bipartisan Policy Committee has been trying to coax reform out
of Congress.
(Reporting by David Morgan and Richard Cowan; Editing by Scott
Malone and Andrea Ricci)
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