Negotiations Continue: Biden and Lawmakers Working to Raise Debt Ceiling Before Potential Economic Catastrophe
President Joe Biden and top lawmakers in Congress are continuing negotiations on raising the debt ceiling before the US defaults, which Treasury Secretary Janet Yellen has warned could happen as early as June 1. Last week, President Biden met with House Speaker Kevin McCarthy and three other top lawmakers to come to an agreement on raising the debt ceiling.[0] Since that meeting, the lawmakers' staff have been holding frequent discussions on what an eventual deal to raise the debt ceiling could look like, including possible areas for compromise, and Biden himself has since appeared optimistic with the directions these talks are going.
The House, where Republicans have a majority, is seeking to reduce government expenditures and is unwilling to increase the debt limit until Democrats and Biden consent to cutbacks in spending.[1] Biden and the Senate Democrats are contending that the discussion concerning government expenditure must be kept distinct from the decision to raise the debt ceiling.[2] McCarthy has insisted that a deal needs to be reached by this weekend to avoid a default.[3]
The White House has warned that prolonged default could trigger a recession on par with the Great Recession, and the Joint Economic Committee previously said that a default could cost Americans $20,000 in retirement savings, and their private student-loan and mortgage payments would surge.[4] The global economy heavily depends on the United States' relative stability, therefore a default would have a significant impact.
Despite Congress's failure to provide a solution, President Biden has been contemplating the use of the 14th amendment to tackle the economic crisis. This would involve declaring the debt ceiling unconstitutional and permanently removing the limit, as the fate of the economy hangs in the balance.[0] However, Biden said he doesn't think that route “solves our problem now” due to potential litigation, so for now, top lawmakers need to find a solution with the president that would ensure Americans don't hurdle into economic catastrophe as soon as next month.[4]
Can you explain the concept of the debt ceiling?[5] It is the limit placed by Congress on the amount of debt the government can accrue.[2] In order to pay its bills to those it borrowed from and dole out money for everything from Medicare benefits to military salaries, the government needs more money, and the debt ceiling has to be raised.[2]
Speaker Kevin McCarthy's proposal to increase the government's debt ceiling in exchange for significant cuts to federal spending was narrowly approved by House Republicans at the end of the previous month.[6] To date, the sole legislation pertaining to the increase of the debt limit that has been formulated, presented, and approved has originated from House Republicans.[7] Despite its aggressiveness, their bill is backed by decades of bipartisan precedent, giving it legitimacy.[7] It is now up to President Biden to present a counterproposal, while senate Democrats attempt to push through their desired course of action.[7]
The primary focus of the 14th Amendment is to ensure that all citizens are granted equal protection under the law.[2] The fourth section states that the legitimacy of the United States' public debt, which was authorized by law and includes debts acquired for compensating pensions and rewards for those who served in suppressing uprisings or rebellions, must not be challenged. Section 4 of the 14th Amendment concerns the national debt and declares that the legitimacy of the United States' public debt, which is authorized by law, cannot be challenged.
In case of a government default, several economists have cautioned about the possibility of extensive job cuts.[8] If a prolonged default occurs, the White House has projected that over 8 million job losses would occur.[1] If Congress does not take immediate action to increase or suspend its self-imposed debt ceiling, the nation may face the inability to fulfill its financial obligations in the near future.[8] Such a default would, in Yellen’s words, cause “an economic catastrophe.”
In fact, Biden, by going on his planned trip and assuaging international concerns, would be playing a vital role in the current debt crisis, perhaps the most vital role of all.[9] Despite his scheduled trips to Japan, Papua New Guinea, and Australia, the potential debt default will continue to cast a shadow over Biden's efforts to strengthen important alliances and reinstate American leadership.[10] An American default would have a ripple effect on an already unstable global economy. As the talks commence, global leaders bring forth their own apprehensions regarding Biden's economic policies, which they deem excessively protective.[10]
0. “Can the 14th Amendment be used for the debt ceiling?” CBS News, 11 May. 2023, https://www.cbsnews.com/news/can-14th-amendment-be-used-for-debt-ceiling
1. “Biden warns ‘millions of jobs’ at risk if debt ceiling not raised” Al Jazeera English, 11 May. 2023, https://www.aljazeera.com/economy/2023/5/11/biden-warns-of-recession-unless-gop-agrees-to-raise-debt-ceiling
2. “The US debt ceiling, simplified. What to know as deadline nears” USA TODAY, 15 May. 2023, https://www.usatoday.com/story/money/economy/2023/05/15/what-is-the-debt-ceiling-explained/70212686007
3. “McCarthy says White House wants ‘default more than a deal’” The Hill, 15 May. 2023, https://thehill.com/homenews/house/4004651-mccarthy-says-white-house-wants-default-more-than-a-deal
4. “Debt ceiling: McCarthy still ‘far apart' with Biden solution to crisis” Business Insider, 15 May. 2023, https://www.businessinsider.com/mccarthy-no-debt-ceiling-solution-need-deal-this-weekend-default-2023-5
5. “A simple guide to debt ceiling, and what the 14th amendment has to do with it” BBC, 15 May. 2023, https://www.bbc.com/news/business-65461927
6. “Republicans take aim at Biden’s climate plan in debt ceiling fight” The Guardian, 9 May. 2023, https://www.theguardian.com/business/2023/may/09/debt-ceiling-climate-crisis
7. “Republicans Are Right to Demand a ‘Dirty' Debt Limit Bill” The Daily Beast, 14 May. 2023, https://www.thedailybeast.com/republicans-are-right-to-demand-a-dirty-debt-limit-bill
8. “What happens if the debt ceiling and banking crisis collide?” CNN, 15 May. 2023, https://www.cnn.com/2023/05/15/investing/premarket-stocks-trading/index.html
9. “Biden Must Go to the G7 Meeting in Japan, as U.S. Debt Default Looms” The Daily Beast, 15 May. 2023, https://www.thedailybeast.com/biden-must-go-to-the-g7-meeting-in-japan-as-us-debt-default-looms
10. “Why Biden really doesn't want to cancel his overseas trip” CNN, 15 May. 2023, https://www.cnn.com/2023/05/15/politics/biden-debt-limit-talks-overseas-trip/index.html
