After months of grandstanding and negotiations over the debt ceiling, Republican lawmakers and the White House reached a tentative deal over the weekend to suspend the federal government’s borrowing limit until January 2025, potentially averting a crisis entirely engineered by the bizarre and uniquely American tactic of using the nation’s full faith and credit as a mere negotiating chip in budget talks.
At the outset, the Republican speaker of the House, Kevin McCarthy, and his caucus demanded extremely dramatic cuts in federal spending while President Biden called for a clean debt limit hike with no strings attached. Unsurprisingly, neither side got everything they wanted. And though Biden was certainly right to ask Congress to raise the ceiling without conditions — specifically because the debt limit is not the appropriate mechanism for Washington to make budget cuts — the reality is that a Republican-led House would have never gone along with that demand.
So now lawmakers are left with a choice, if you can call it that: Either pass the compromise agreement by Monday or let the nation default on its debt for the first time in history — a likely catastrophic event for the entire global economy. In other words: Approve the deal and approve it now.
For Republican lawmakers, particularly the louder hard-right members in their ranks, the compromise looks little, if anything, like the far-reaching debt limit bill they passed last month. In that proposal, the federal government’s discretionary spending would have been cut by $3.2 trillion over 10 years; instead, the bill Congress is considering now will cut that spending by roughly $860 billion over the same period. But just as Republicans expected the president to be realistic and eventually come to the negotiating table, they too should have known that their drastic cuts would have never gotten the president’s signature, let alone pass the Democratic majority in the Senate.
For their part, Democrats would be justified in criticizing much of what’s in the deal: It claws back some of the new funds Congress approved last year for the Internal Revenue Service, which would have bolstered the agency’s ability to raise revenue (and actually reduce the deficit) by cracking down on wealthy tax cheats; imposes through 2030 work requirements for some older recipients of food and cash assistance, which could potentially knock hundreds of thousands of people off those programs; and establishes for the next two years a 1 percent cap on all discretionary nondefense spending, which, given the pace of inflation, could mean a significant budget cut for a whole host of social programs.
But at the end of the day, the reason this bill is being considered in the first place is because Democrats failed to raise the debt ceiling when they had the chance last year. After Republicans won the 2022 midterm election, Treasury Secretary Janet Yellen urged Democrats to lift the debt limit during the lame duck period in order to avoid this very standoff. But they decided to hand the responsibility of lifting the impending debt limit to the incoming House majority, and the bill they are considering voting for, and all the qualms they might have with it, are a result of that shortsighted decision. And so for now, they should vote to pass what’s on the table because it could have been much worse.
For example, Republicans wanted to cut back all of the new IRS funds that passed Congress last year but in the end will only get to repurpose $20 billion of it — meaning that the IRS can continue its plans to further crack down on tax evaders, at least for the next few years. Moreover, while the age of welfare recipients who will face work requirements will rise from 49 to 54, the final deal likely helps offset the negative impact of that policy by exempting veterans, homeless people, and adults who were raised in the foster care system from such requirements. The deal also leaves the climate-oriented tax cuts of the Inflation Reduction Act untouched, which means the administration’s efforts to more effectively address climate change won’t be hampered by this bill.
Ultimately, this entire ordeal underscores the absurdity of the debt limit itself. Not only are there legitimate questions about its constitutional validity given that the federal government is obligated to pay all of its debts under the 14th Amendment, but the United States is one of just two countries that has a debt ceiling. (The other country, Denmark, mostly has it as a perfunctory gesture; in reality, the country’s debt limit is so high that it’s unlikely to ever be crossed.) The stakes in these latest rounds of negotiations over the debt ceiling show why other countries are wise not to have one — and, more importantly, why the next time Congress has the opportunity, lawmakers should abolish the debt ceiling altogether.
Until then, Congress must do whatever it can to avoid default. While this deal might be less than ideal, lawmakers should remember: none of these changes will be irreversible; a credit default is.
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