For weeks, President Joe Biden successfully shifted responsibility for the debt ceiling crisis onto the shoulders of House Speaker Kevin McCarthy (R-Calif.).
By refusing to risk the “full faith and credit” of the United States in negotiating over the debt ceiling, the president was able to portray the speaker as “holding the economy hostage.” After releasing his 2024 budget proposal on March 9, Biden was able to tell McCarthy, “Show me your plan” for cutting spending and refuse to enter talks until he did.
Now, McCarthy’s victory in uniting the fractious Republican caucus to pass a debt and spending bill in the narrowly divided House of Representatives calls the president’s strategy into question.
As pressure mounts from all sides to end the standoff, Biden faces a choice that could set the tone for his dealings with Congress over the next two years.
Will the president continue to stonewall, betting that the American people will blame Republicans for perpetuating the crisis by proposing extreme spending cuts? Or will he find a compromise solution that resolves the crisis while keeping his legislative agenda intact?
Biden’s decision will likely rest on a triangulation of key factors, including the continued patience of his own party members, the reaction of financial markets to a continued standoff, and the strength of McCarthy’s political position relative to his own.
Mounting Crisis
When the nation’s statutory borrowing limit of $31.4 trillion was reached in January, McCarthy insisted Congress would not authorize an increase without some agreement to limit future spending.Biden refused to negotiate, either on the debt ceiling or cuts to federal spending, placing responsibility on McCarthy to first propose a plan for cutting spending.
The situation changed on April 26 when Republicans narrowly passed the Limit, Save, Grow Act along party lines.
“It’s up to you now,” McCarthy said, as if addressing Biden, moments after the bill’s passage. “Whether the economy gets in any trouble, it’s you. Because Republicans raised the debt limit. You have not. Neither has [Senate Majority Leader Chuck] Schumer.”
The bill lifts the debt ceiling by $1.5 trillion, just enough to push the next debt crisis into the 2024 election year. At the same time, it includes spending cuts and other provisions that Democrats find unacceptable.
The proposal reduces 2024 spending to the 2022 level, caps spending growth at 1 percent for 10 years, claws back unspent COVID-19 relief funds, and reinstates work requirements for some SNAP and Medicaid recipients.
And, flying in the face of Biden’s green energy initiative, the Republican plan removes barriers to increased drilling for petroleum and gas.
Managing Democrats
Democrats in Congress are unified in opposing the Republican spending cuts, which they say will decimate the social programs ordinary Americans rely on. But cracks have appeared in the Blue Wall on the question of compromise with Republicans.Sen. Joe Manchin (D-W.Va.) was the first to criticize Biden’s refusal to negotiate.
“While it is reasonable to sincerely disagree with any specific debt ceiling approach, we will achieve a historic default, and the economic whirlwind which follows, if President Biden continues to refuse to even negotiate a reasonable and commonsense compromise,” Manchin said in a statement on April 20.
“For the sake of the country, I urge President Biden to come to the table, propose a plan for real and substantive spending cuts and deficit reduction, and negotiate now.”
Freshman Rep. Greg Landsman (D-Ohio) offered more terse comments to reporters.
“I don’t think there’s any harm in the two of them sitting down to talk,” Landsman said, as a staffer confirmed for The Epoch Times. “The idea that we’re even coming this close to a potential default is insane.”
Other Democrats have urged Biden to enter talks immediately but have tried to separate the debt ceiling increase from negotiations on the budget.
“Of course, President Biden should sit down with Speaker McCarthy,” Sen. Amy Klobuchar (D-Minn.) said in a televised interview on April 23.
“He should negotiate on the budget. OK, that is the place to negotiate. And they should start those negotiates now, not using the American people and their mortgages as hostages,” she said. “We’ve got to simply make clear we’re going to avoid default and get this behind us.”
Karine Jean-Pierre, White House press secretary, stated the same distinction.
“As the president said yesterday, he is happy to meet with Speaker McCarthy but not to negotiate the debt limit,” Jean-Pierre said at a press briefing on April 27.
Biden’s insistence that there can be no negotiation on the debt ceiling has been based on the idea that there’s no choice but to raise the limit. Both sides have stated that they don’t want a default.
And Democrats often point out that Republicans raised the debt ceiling three times during the Trump administration.
Yet, McCarthy insists that even those increases came only after negotiations with Democrats on future spending.
“I was actually in the room. That debt ceiling didn’t get raised without negotiations. The difference is the Democrats wouldn’t raise the debt ceiling until President Trump agreed to spend more money,” McCarthy told reporters on April 20.
The Wall Street Factor
The crisis has been building since January when Treasury Secretary Janet Yellen notified Congress that the nation had reached its statutory borrowing limit. Yellen avoided breaching the ceiling through the use of so-called extraordinary measures, which will stave off a breach until sometime this summer.Yet the longer the standoff lasts, the greater the likelihood of financial turmoil, experts have warned.
“If both sides stonewall one another until the eleventh hour, it’s possible that we’ll see U.S. government security prices crater and the yields on short-term instruments (bills and notes) shoot up to levels not seen in years,” Peter C. Earle, an economist at the American Institute for Economic Research, told The Epoch Times.
That’s essentially what happened during the debt ceiling crisis of 2011. Financial markets reacted poorly to the possibility—let alone the reality—of a default on U.S. financial obligations. The price of Treasury bonds rose, interest rates increased, and Standard & Poor’s downgraded the U.S. credit rating.
While markets have held steady, a growing number of business leaders are calling for an immediate bipartisan solution to the debt problem.
“The administration should meet with Congressional leaders without delay to find a path forward to raise the debt ceiling and address runaway deficits,” the U.S. Chamber of Commerce, the nation’s largest lobbying group, said in an April 26 statement.
Joshua Bolten, CEO of Business Roundtable, issued a similar call.
“Today’s vote in the House is an important step toward preventing a default and preserving the full faith and credit of the United States. Business Roundtable is hopeful this action will jump-start bipartisan negotiations on raising the debt ceiling as soon as possible,” Bolten wrote.
McCarthy’s Win
Up to now, the president has been dealing with a speaker who appeared to be a weak political opponent.McCarthy’s election to the speakership in early January required 15 ballots and a number of concessions to hardliners within the Republican caucus. Those included appointing more members of the House Freedom Caucus, the most conservative group among House Republicans, to the powerful Rules and Appropriations committees.
McCarthy also agreed to a rule change that enables a single House member to call for a vote to remove the speaker.
Despite those impediments, McCarthy has engineered a pair of legislative achievements. Those were the overturn of a controversial revision of the District of Columbia’s criminal code and declaring an end to the COVID-19 state of emergency. Despite having threatened to veto the measures, Biden signed both into law.
“You’ll probably end up signing this one as well,” McCarthy said after the passage of the Limit, Save, Grow Act.
Given McCarthy’s legislative wins, the president appears to be dealing with a stronger political adversary than he was a few weeks ago.
Public Patience
Both sides in this debate have attempted to shift responsibility for action to the other. Before passage of the Republican bill, Biden’s refrain was “Show me your plan.”Now, having passed an increase to the debt ceiling, McCarthy repeats the mantra, “We’ve done our job.”
A pair of recent polls indicate that Americans are less interested in rhetorical victories than practical solutions.
A CBS News poll shows that 70 percent of the American public favor increasing the debt ceiling if the country would otherwise default on its obligations.
At the same time, a PBS NewsHour/NPR/Marist poll reports that an identical percentage of people want federal officials to compromise and find solutions.
How long the public will remain patient while both sides accuse the other of creating the problem is a question both Biden and McCarthy will have to answer.
Historically, both sides have borne their fair share of the blame for debt crises. Following the debt negotiations of 2011, the approval rating for the Republican party dropped from 41 percent to 33 percent in a single month.
President Barack Obama’s approval rating dipped to 40 percent, the lowest level of his tenure.
“I’m happy to meet with McCarthy, but not on whether or not the debt limit gets extended,” Biden told reporters on April 26. “That’s not negotiable.”
“No clean debt ceiling is going to pass the House. We can’t do that to our children and grandchildren. We’re $31 trillion in debt,” McCarthy said the same day.
Breaking that impasse is the next test of President Biden’s leadership.
