US Debt Ceiling Negotiations: Will a Deal Be Reached Before the June 1st Deadline?
As the June 1st deadline to raise the US debt ceiling approaches, negotiations between President Joe Biden and House Speaker Kevin McCarthy continue. The debt ceiling is the maximum amount of money that the US government can borrow to pay its debts, and raising it is necessary when the government needs to borrow more money. While raising the ceiling has historically been a routine procedure for Congress, it has become a political battle as of late, with Republicans seeing it as an opportunity to make demands.
President Biden initially drew two lines in the sand: the US would not default on its debt and he would not negotiate over legislation to prevent such a catastrophe. However, negotiations have been ongoing, with Republicans proposing cuts to Medicare and Social Security in exchange for their support of a debt-ceiling increase. Biden had presumed that this would trigger a public backlash and the House GOP would consent to a clean debt-ceiling hike, but this has not been the case.
While Biden has proposed the closure of various tax loopholes dear to the GOP donor class, there is no indication that this has caused McCarthy to moderate his demands. McCarthy has continually urged his caucus to stay united in the debt-ceiling fight, noting that their hand has been strengthened by their ability to pass a bill last month that lifted the borrowing cap in exchange for far-reaching spending cuts.
However, McCarthy is expected to lose dozens of his conservative members on any deal cut with the White House. This implies that the California Republican will need the support of Democratic votes in order to successfully pass the bill. Democrats preparing for the sprint to pass an eventual deal ahead of the deadline anticipate that McCarthy could lose a substantial chunk of his conservative wing — leaving it up to Democrats to supply somewhere between 50 and 100 votes of their own.
Officials have warned that a default by the United States, the biggest global economy, could prove catastrophic, roiling the world’s stock markets, forcing job layoffs in the US, and hurting the US credit standing, resulting in higher interest rates for borrowers. Experts say a US default could wreak havoc on global financial markets. The creditworthiness of US treasury securities has long bolstered demand for US dollars, contributing to their value and status as the world’s reserve currency.
While some experts have proposed alternatives that would not require congressional approval, including invoking the Fourteenth Amendment of the US Constitution to issue more debt and selling US gold and minting a platinum coin worth $1 trillion, Biden has publicly called these measures untenable. Deferring payments to military personnel, Social Security, and Medicare beneficiaries is another option available to the Treasury Department. It has the option of prioritizing debt payments, although in March 2023, Treasury Secretary Yellen dismissed that idea as “default by another name.”
As the negotiations continue, rank-and-file Democrats acknowledge that they will be under enormous political pressure to support any deal backed by Biden, lest they leave the economy and the president of their own party out to dry. Republicans who are part of the negotiations have admitted that they require the assistance of Democrats to approve any legislation in the House, as it is probable that they will not retain the support of the approximately thirty-six conservatives in the House Freedom Caucus. In order to bring any bill to the floor, McCarthy is aware that he requires the support of “a majority of the majority” of his conference, which implies that up to 100 Democrats may have to approve the proposed legislation.
In the end, a delicate balance must be struck in a deal that allows both parties to claim victory, but not so loudly that McCarthy’s speakership is put in jeopardy or that Biden is seen as giving in to the hostage-takers. While negotiations continue, the world watches and waits to see if a deal can be reached before the deadline.
0. “Debt ceiling negotiations: Are Republicans just posturing? Or is a deal really out of reach?” Vox.com, 25 May. 2023, https://www.vox.com/politics/2023/5/25/23736296/debt-ceiling-mccarthy-biden-talks-default
1. “What Happens When the U.S. Hits Its Debt Ceiling?” Council on Foreign Relations, 25 May. 2023, https://www.cfr.org/backgrounder/what-happens-when-us-hits-its-debt-ceiling
2. “In debt ceiling talks, House Dems worry over Biden’s approach with GOP” The Washington Post, 25 May. 2023, https://www.washingtonpost.com/politics/2023/05/24/debt-ceiling-negotiations-house-democrats/
3. “Is Joe Biden Botching the Debt Ceiling Fight?” New York Magazine, 25 May. 2023, https://nymag.com/intelligencer/2023/05/is-joe-biden-botching-the-debt-ceiling-fight.html
4. “White House believes massive Dem bailout may be needed to pass debt ceiling compromise” POLITICO, 24 May. 2023, https://www.politico.com/news/2023/05/24/white-house-votes-debt-ceiling-deal-00098487
5. “Democrats have warning for White House that their support for debt deal is not guaranteed” CNN, 26 May. 2023, https://www.cnn.com/2023/05/25/politics/democrats-warning-white-house-debt-deal/index.html
6. “Democrats dread a potential Biden and McCarthy debt ceiling deal” Axios, 25 May. 2023, https://www.axios.com/2023/05/25/democrats-debt-ceiling-deal-votes-biden
7. “Kevin McCarthy's Hardest Job Will Be Selling a Debt-Limit Deal to Conservatives” Barron's, 25 May. 2023, https://www.barrons.com/articles/debt-ceiling-mccarthy-congress-compromise-79f609ce