The High-Stakes Standoff over the Debt Ceiling: Biden’s No-Negotiation Stance and the Implications of a Potential Default
President Biden's no-negotiation stance on the debt ceiling has been met with criticism from some who feel it is neither realistic nor sustainable.[0] This stance was born of past experience when Republicans dragged out debt talks with the Obama administration to the brink of default, resulting in a downgrade of the U.S.’s credit rating.[1] However, recent budget discussions with Republicans have made it clear that the negotiations have revolved around the debt ceiling.[2] Biden has been adamant that he will not accept a debt ceiling deal that includes spending cuts, which has left Congress in a stalemate with a default looming as soon as June 1.[2]
The White House talks between Biden and top lawmakers are expected to include House Speaker Kevin McCarthy, House Minority Leader Hakeem Jeffries, Senate Majority Leader Chuck Schumer, and Senate Minority Leader Mitch McConnell.[3] Economists and administration officials have warned that a potential default on the national debt would amount to financial disaster, wreaking havoc on the domestic economy and rattling global markets. A default could cause a huge ripple of negative consequences throughout the global financial system. A downgrade in the nation's credit rating may have lasting negative effects on the worth of U.S. treasuries and decrease the country's attractiveness as an investment.[4]
There are those who have urged Biden to independently increase the debt limit, but the administration has not shown enthusiasm towards this proposition.[5] Last week, Biden stated that he was “considering” utilizing the authorities granted by the 14th Amendment, but he admitted that it would encounter an unpredictable course.[6] Biden's public statements on the matter have been muddled, and he will have to find another way to deal with the debt ceiling.[7] The 14th Amendment can be invoked in the most evident manner.[7] However, Biden has suggested that such a course would take too long due to litigation and court review.[7] Treasury Secretary Yellen has unhelpfully added to the mixed messaging, terming the use of the 14th Amendment as provoking a “constitutional crisis.”
House Republicans have demanded any debt ceiling increase be paired with dramatic cuts to spending at non-defense federal agencies and passed a bill to that effect last month.[8] Priorly, Biden and Democrats in Congress declined to engage in negotiations and insisted on a debt limit increase that was “clean” meaning without any conditions.[9] It is unlikely that the Senate will consider the bill passed by the House, and the White House has declared that Biden would use his veto power on it.[9] The Republican plan has been cautioned by the Biden administration for its potential to compel furloughs throughout federal agencies, resulting in job cuts for federal employees in some instances.[9]
Biden is set to leave Wednesday for a trip to the G-7 summit in Japan and was planning to travel afterward to Australia to meet with the leaders of what's known as the Quad: the U.S., Australia, Japan, and India. Biden had intended to make a stopover in Papua New Guinea en route to Sydney, with the aim of engaging with leaders from the Pacific Island nations.[10] However, one issue is logistical: Biden is scheduled to leave Wednesday for G-7 meetings in Japan and subsequent stops that will keep him away from Washington for a week.
Given the amount of time needed to get a bill through both chambers of Congress, Speaker Kevin McCarthy has suggested that the two sides need to reach an agreement by the end of this week.[11] Financial analysts caution that the uncertainty surrounding the country's debt could potentially cause global market disturbances and result in harmful credit rating downgrades, even prior to the June 1 X-date.[12]
During bipartisan negotiations on the debt ceiling, there’s talk of a parallel budget deal that might set spending levels for several years, loosen energy permitting regulations, enact expanded work requirements for some aid programs, and snatch back unused Covid aid.[13] The current state of affairs is vastly different from the starting point of House Republicans just a month ago. They had initially proposed a bill that would repeal Democratic policies and implement drastic reductions in spending.[13] Senate Republicans are counting on their counterparts in the House to demonstrate some flexibility, as the conservative priorities for a debt deal have been set by the House's bill.[13]
In conclusion, the negotiations over the debt ceiling are at a critical juncture, with both sides needing to find common ground to avoid a potential default on the national debt. The stakes are high, and financial analysts are warning of the negative consequences that could result from a default. Both sides will need to come to the table with a willingness to compromise and find a solution to this pressing issue.
0. “A simple guide to debt ceiling, and what the 14th amendment has to do with it” BBC, 16 May. 2023, https://www.bbc.com/news/business-65461927
1. “Biden Has Already Caved on the Debt Ceiling” The Atlantic, 16 May. 2023, https://www.theatlantic.com/politics/archive/2023/05/biden-gop-debt-ceiling-negotiation/674070/
2. “AOC: Biden compromising with GOP on debt ceiling is ‘profoundly destructive'” Business Insider, 16 May. 2023, https://www.businessinsider.com/aoc-biden-should-not-compromise-on-debt-ceiling-solution-destructive-2023-5
3. “President Biden Meets with Congressional Leaders on the Debt Limit” C-SPAN , 17 May. 2023, https://www.c-span.org/video/?528128-1/president-biden-meeting-congressional-leaders-debt-limit
4. “Nine questions you may have about the debt ceiling” NPR, 15 May. 2023, https://www.npr.org/2023/05/15/1175733139/debt-ceiling
5. “Permitting in play as White House debt talks resume” E&E News, 15 May. 2023, https://www.eenews.net/articles/permitting-in-play-as-white-house-debt-talks-resume/
6. “GOP rep: Party will ‘blow crap up’ if Biden takes 14th Amendment route” MSNBC, 12 May. 2023, https://www.msnbc.com/rachel-maddow-show/maddowblog/gop-rep-party-will-blow-crap-biden-takes-14th-amendment-route-rcna84140
7. “The Budget Farce: A Travesty in Two Acts” The American Prospect, 16 May. 2023, https://prospect.org/economy/2023-05-16-budget-farce-travesty-in-two-acts/
8. “What Happens If a Debt Ceiling Agreement Isn't Reached” TIME, 14 May. 2023, https://time.com/6279707/debt-ceiling-agreement/
9. “With Just Weeks Until Potential Furloughs, Biden and McCarthy Hold ‘Productive' Debt Talks” GovExec.com, 16 May. 2023, https://www.govexec.com/management/2023/05/potential-furloughs-biden-and-mccarthy-productive-debt-talks/386446/
10. “Biden meets McCarthy and others over debt ceiling impasse” NPR, 16 May. 2023, https://www.npr.org/2023/05/16/1176216587/debt-ceiling-talks
11. “Parties scramble for deal on debt limit, budget” Roll Call , 15 May. 2023, https://www.rollcall.com/2023/05/15/parties-scramble-for-deal-on-debt-limit-budget/
12. “Biden appoints 2 additional top aides to try and get to the finish line on debt ceiling talks” POLITICO, 16 May. 2023, https://www.politico.com/news/2023/05/16/biden-and-mccarthy-remain-at-odds-as-debt-ceiling-deadline-looms-00097240
13. “Intensifying debt talks threaten rare GOP unity” POLITICO, 15 May. 2023, https://www.politico.com/news/2023/05/15/debt-talks-gop-bill-00097052
