The federal government has perhaps less than a month left before an economically devastating default on its debt.
No matter who bears the political blame for a default, aides acknowledge that President Biden has a lot to lose if the nation tips into recession just as he is moving into his re-election campaign.
Mr. Biden has several strategic options as he tries to prevent that from happening. All have been the subject of discussions inside the administration and with Democratic allies in recent weeks. They range from continuing to hold out for Republicans to raise the nation’s debt limit with no strings attached to preparing unilateral action to effectively bypass the limit and keep paying the nation’s bills.
Some involve negotiations with Republican leaders, which Mr. Biden will insist are not related to the debt limit even though they would be.
Each path carries risks, which administration officials acknowledge privately. The biggest by far is economic calamity: White House economists warned in an analysis released on Wednesday that if the country defaulted on its debt and that default continued for several months, the economy would shed eight million jobs as it entered recession.
The economists also warned that merely approaching a possible default would rattle markets and drive up borrowing costs across the economy, “inhibiting firms’ ability to finance themselves and engage in the productive investment that is essential for extending the current expansion.”
Here are the paths available to Mr. Biden, as his aides and allies see them.
Stay the course
Mr. Biden has insisted for months that lawmakers must raise the nation’s borrowing cap with no conditions attached, saying that it simply allows the United States to pay for spending Congress has already authorized. He could continue to do so, refusing to negotiate, as many progressives have urged him to do.
It would be an attempt to stare down House Republicans, who last week passed a bill pairing an increase in the limit with cuts to federal spending and a reversal of Mr. Biden’s climate agenda. Mr. Biden would effectively be daring Speaker Kevin McCarthy of California to allow the government to run out of cash to pay its bills on time, which the Treasury Department estimates could happen as soon as June 1.
The risk is that Mr. McCarthy refuses to give in, pointing to the House bill as evidence that Republicans had done enough to raise the debt limit. Mr. Biden would count on pressure from business groups and turmoil in financial markets to push Republicans to blink at the last moment and at least pass a bill to avoid default for a few weeks or months. But as of now, House Republicans have shown no willingness to pass such a bill, known as a “clean” debt-limit increase. Neither have a critical mass of Senate Republicans needed to advance the bill in that chamber.
Negotiate spending cuts not tied to the debt limit
Mr. Biden will welcome Mr. McCarthy and other congressional leaders to the White House next week for talks about fiscal policy — how much the nation taxes, spends and borrows. The president says those talks are divorced from the debt limit, but effectively, they are not.
The deadline hanging over the talks is the so-called X-date, estimated for June 1; Mr. Biden’s invitation to congressional leaders was accelerated by the revised projections of when that date will hit. In contrast, the bill funding federal government operations, which Mr. Biden signed late last year, runs through the end of September.
Mr. Biden could negotiate without “negotiating” by trying to broker an early agreement on spending levels for the next fiscal year, before the X-date. In exchange, Mr. McCarthy would commit to passing a clean extension of the debt limit.
Business groups and even some administration officials expect any deal of that nature to center on limits on federal discretionary spending — though almost certainly not as stringent as the ones in the bill Republicans have passed. White House officials have said privately for months that they do not expect the House to approve significant spending increases for next year anyway, so some sort of limits may prove palatable to Mr. Biden, depending on the details.
The risk of that strategy is that Mr. McCarthy’s most conservative members have shown no appetite for a deal of that scope. Mr. Biden will not accept those members’ more sweeping demands. That complicates the prospects for an agreement that runs through the speaker.
Bypass McCarthy
Mr. Biden could try to bypass the speaker and court a handful of moderate Republicans in the House and the Senate to vote to raise the limit, offering some fiscal concessions as an enticement. Bringing such a deal to the House floor could require some legislative maneuvering, like the so-called discharge petition Democrats have been keeping at the ready for months.
It could also require a different approach from Mr. Biden to the congressional Republicans he needs to pass such a bill. Moderate Republicans in the House say they are receiving little friendly outreach from the White House so far. Instead, Biden administration officials have gleefully hammered them for voting to advance the Republican debt-limit bill and its deep spending cuts.
This week administration officials have posted, again and again, the headshots and names of House Republicans on Mr. Biden’s official Twitter account, accusing them of voting to cut funding to veterans’ programs and Meals on Wheels. Two of the featured lawmakers were members of leadership, including Mr. McCarthy. Two others were high-profile, far-right congresswomen. The remainder — more than two dozen — were lawmakers in seats Mr. Biden won in 2020.
Officials have defended that strategy. “I have hope that we will find a path to avoid default,” Shalanda Young, the White House budget director, told reporters on Thursday, after assailing budget cuts included in the Republican bill. “But it’s our job to keep coming to you, to go to the American people, and make sure people understand what this debate is about.”
Go it alone
If Mr. Biden’s chosen tactics do not produce a bill he will sign that raises the debt limit before the X-date, the president will have to choose between allowing the nation to default or pursuing what is effectively a constitutional challenge to the debt ceiling by continuing to borrow to pay the bills when the government runs out of cash.
That challenge would be rooted in a clause in the 14th Amendment that stipulates that the government must pay its debts. Administration officials have debated that idea, with no resolution, for months. But even its proponents concede that it would not be a perfect solution. The move would draw an immediate court challenge and sow at least temporary uncertainty in the bond market, sending government borrowing costs soaring.
Catie Edmondson contributed reporting.
Source: New York Times
