The arguments in favor are generally the same every time. One is that the money’s already been spent — raising the debt limit just lets us keep paying back our creditors. (More on that in a second.) Another is that failing to raise the limit would cause the US to default on some of its obligations, triggering a crisis in the financial system.
The reasons against it are simpler. Outstanding public debt is about $28.7 trillion. That’s a hard number to choke down and it’s getting larger every second.
Here’s what you need to know about the debate that’s going to unfold over the next week.
What happens if the debt ceiling isn’t raised?
Treasury Secretary Janet Yellen has been warning Congress for months about the consequences of not raising the limit. The US technically reached its limit in August, when a two-year reprieve Congress passed in 2019 expired. The Treasury Department has been moving things around to cover costs since then.
This is from a CNN business report:
“A failure to raise the debt limit would have serious negative consequences,” Goldman Sachs economists wrote in a report to clients Monday titled “The debt limit looks riskier than usual.”
The Wall Street bank added that if Congress does not raise the debt limit in time, the Treasury Department would need to halt more than 40% of expected payments — including some to households.
Who owns US debt?
Why is there a standoff over the debt ceiling?
That means that for now there’s a standoff.
“Let’s be clear: With a Democratic President, a Democratic House, and a Democratic Senate, Democrats have every tool they need to raise the debt limit. It is their sole responsibility. Republicans will not facilitate another reckless, partisan taxing and spending spree.”
It’s a particularly rich position for McConnell since Republicans unilaterally passed the tax cuts in 2017 that turbocharged the deficit spending highway the US has been driving on for decades. They also approved the first round of pandemic relief passed under former President Donald Trump.
Who is to blame?
There’s plenty of hypocrisy to go around. Republicans complain that Democrats’ spending proposals add too much to the debt. Democrats complain that Republican tax cuts add too much to the debt.
Meanwhile, they’re both adding to the debt whenever they’re in power. Democrats just happen to be in power right now.
How has this worked in the past?
In the past 50 years, according to the Treasury Department, Congress has acted 78 times to raise the debt limit.
That includes 49 times under Republican presidents and 29 times under Democratic presidents.
The last time lawmakers voted to rise the debt limit, it was a bipartisan affair. They raised the limit for a time period — two years — instead of a dollar amount, as in many previous votes.
What happens next?
Democrats will try to shame Republicans, arguing raising the limit has more to do with paying bills for money already spent rather than new spending.
It’s a valid point, but Democrats’ current effort to pass both a $1.5 trillion bipartisan infrastructure and a $3.5 trillion Democrats-only infrastructure bill to remake the economy and address climate change complicates their message.
So they’ll try to shame and cajole Republicans. They could also sugarcoat the debt limit vote by burying the measure in a must-pass spending bill. Keep the government running AND keep the government solvent.
The smart money is still on lawmakers figuring out a way to raise the limit and pay the bills for the money they’ve (we’ve) already spent.
CNN’s Chris Cillizza calls it the little secret about raising the debt ceiling: “Congress has never not done it. Why? Because the consequences of not doing it are far too dire for the country: The Treasury Department would default on its debts, badly damaging the country’s economic credibility around the world.”
When Republicans did seriously threaten to get in the way of the debt limit increase, in 2011, Cillizza points out that it led Standard & Poor’s to downgrade its ratings on US debt for the first time in 7 decades.
He writes, smartly:
This then is a decidedly dumb debate. Members of Congress are engaging in its usual brinksmanship over
- a) whether to pay bills they’ve already rung up and
- b) knowing they will, eventually, find a way to raise the debt ceiling.
Because they always do.
If it’s a dumb debate, why not just get rid of this charade?
The billionaire David Rubenstein, who founded the Carlyle Group, is not alone in thinking the US should give the Treasury Department the ability to pay the bills.
It’s written into law, however, and Congress has acted in various ways to allow for debt since the country’s founding. The 14th Amendment refers to the validity of public debt in law. If lawmakers can’t agree to do something like raise the debt limit, what are the odds they’ll be able to do something like end the debt limit?
Should you be worried about the debt?
There are plenty of organizations and think thanks that would tell you it’s a huge problem.
The government balance sheet, she said in a recent Ted Talk, isn’t like you’re personal balance sheet. The US government, unlike you, can print money.