As Americans gather (or reduce COVID risk by limiting their gatherings) for Thanksgiving, we can expect an uninvited and certainly unwelcome guest: the specter, once again, of imminent economic catastrophe if Congress should fail to repeal, increase, or suspend the debt ceiling in the next few weeks. According to Treasury Secretary Janet Yellen, absent congressional action, the government will have insufficient funds to pay its obligations beginning December 15, which is 24 days from now. In the past, even closely approaching the debt ceiling limit before congressional action led to a downgrade of the federal government’s credit rating, needlessly costing billions of dollars in added borrowing costs. Failure to act quickly would thus be costly; failure to act at all before December 15 would likely be catastrophic, sending ripples through the global financial system and, before long, deeply harming the real economy—which is to say, real people.
How did we get here—again? And how can we escape? As my fellow Verdict columnist and frequent co-author Professor Neil Buchanan and I have explained on numerous occasions since 2011 (when the Republican Congress first weaponized the debt ceiling), the statutory cap on the number of dollars in debt that the federal government may incur is a completely unnecessary law that serves no salutary purpose. Fiscal hawks can restrain the level of debt without a debt ceiling (as nearly every other country in the world does), by restraining spending, increasing taxes, or both. The debt ceiling serves exclusively as a doomsday machine for members of Congress—almost invariably Republicans in recent years—willing to hold the global economy hostage either as leverage for the enactment of legislation they could not otherwise obtain (as congressional Republicans did during the Obama presidency) or simply to frustrate governance (as they are doing now).
In a perfect world, indeed, even in a slightly less awful world, Congress would thus repeal the debt ceiling or do the equivalent. Under a mechanism known as the Gephardt Rule, the debt ceiling automatically rose when the shortfall between revenue and appropriations required additional borrowing. Reinstatement of that rule would be most welcome, but it won’t occur absent a change in the filibuster rule—which Democratic Senators Joe Manchin and Kyrsten Sinema oppose. Their opposition to filibuster reform also precludes a simple increase in the debt ceiling through ordinary legislation. Although eleven Republican senators voted last month to end debate on (that is, not to filibuster) a short-term debt-ceiling increase, the fast and furious response of former President Donald Trump and the Republican base in the thrall of his personality cult will likely prevent at least two of those eleven not-entirely-cowardly souls from reprising their profiles in courage. The chamber would thus fall short of the sixty votes needed to break a filibuster.
Accordingly, in order to raise the debt ceiling to avoid economic catastrophe, Democrats will need to act alone. The only way to do that (absent filibuster reform) is through the cumbersome process of reconciliation—the same process now being used in an effort to enact the Build Back Better bill. Yet at various moments in the last year, Democrats in Congress have expressed reluctance to go it alone on the debt ceiling. They are understandably infuriated, given that a debt ceiling increase goes to pay mostly for past borrowing, here occasioned in substantial part by the massive tax cut measure (mostly for the wealthy) passed by Republicans and signed by former President Trump. However, infuriated or not, Democrats should use reconciliation in one form or another to raise the debt ceiling.
McConnell’s Wish to Avoid Catastrophe
Senator McConnell knows who butters his bread. A debt-ceiling-fueled default would be ruinous for the country and thus for the economic elites who comprise the donor class for Republican politics. Although McConnell frequently fans the flames of the culture wars, he is fundamentally a pragmatist and, in his own way, a patriot. McConnell’s conception of the national interest differs substantially from mine, and, as his shameless hypocrisy with respect to judicial appointments and obstruction of the policy agenda of President Obama and now President Biden show, plays political hardball, but there do seem to be some lines he won’t cross. Thankfully, bringing on a wholly unnecessary and politically generated economic catastrophe appears to be on the other side of the line.
Unfortunately, there do not appear to be nine more Senate Republicans willing to irk the former President and his pitchfork-wielding mob. Thus, to avoid economic meltdown, Democrats will need to use reconciliation. They could have included a debt-ceiling increase in Build Back Better, but given the likelihood that Democratic Senators Manchin, Sinema, and perhaps others will insist on amendments to Build Back Better and that the parliamentarian will reject the bill’s immigration provisions, the bill that emerges from the Senate will almost certainly need to go back to the House for another vote. There is thus no guarantee that Build Back Better will become law at all, much less before December 15.
That leaves Congress with one realistic option. The federal statute that creates the reconciliation process permits its use to “specify the amounts by which the statutory limit on the public debt is to be changed,” that is, to raise the debt ceiling in a stand-alone bill that is not subject to a filibuster. The catch is that any bills considered via reconciliation must pass over a complex and potentially time-consuming set of procedural hurdles, including the possibility of “vote-a-ramas,” in which the full Senate must consider and vote on amendment after amendment.
The Constitution gives each chamber of Congress the ability to set its own procedural rules, so the Senate could streamline the process for considering a debt ceiling increase via reconciliation. And reportedly, Senator McConnell met with Senate Majority Leader Chuck Schumer last week to discuss a process that would allow Democrats to go forward via reconciliation without the usual procedural hurdles.
Democrats Should Accept McConnell’s Offer
Will that happen? The answer is not entirely clear. Some Senate Democrats say that they oppose using reconciliation to raise the debt ceiling. They insist that: (a) Republicans have an obligation to assist in passing bipartisan legislation to authorize borrowing to cover a revenue shortfall for which Republicans themselves bear substantial responsibility; and (b) given the action of eleven Republican Senators last month, Republicans will again blink and, as Democratic Senator Chris Murphy put it, “at least allow [the Senate] to increase the debt limit with Democratic votes.” That first proposition is correct—Republicans ought to share responsibility for raising the debt ceiling—but the second proposition—that they will act responsibly—is highly dubious.
Hoping for ten Republican senators to blink is very risky. Senator McConnell has already told President Biden and Senator Schumer that he will obstruct any path to a debt ceiling increase other than reconciliation. Even if McConnell were to capitulate—as seems plausible given his pragmatic streak and modicum of sanity—too many of his Republican colleagues fear a primary challenge from a Trump-backed firebreather to be confident that McConnell could round up enough support to avoid economic catastrophe.
Moreover, there is no good reason for Senate Democrats to insist on Republican cooperation in any particular path to increasing the debt ceiling. Republican candidates for office will use the fact that Democrats voted to increase the debt ceiling to mislead voters with attack ads accusing them of reckless borrowing, but they will do that regardless of what procedure Democrats end up using to raise the debt ceiling. Surely those voters who do not understand the difference between policies that necessitate borrowing and borrowing to pay for those policies will have even less understanding of the difference between a bill that passes with only Democratic votes after ten or more Republicans allow cloture (which happened in October) and a bill that passes with only Democratic votes via reconciliation.
Thus, even seen in purely political terms, passing a debt ceiling increase via reconciliation should be a win for Democrats. There is little advantage to be gained by proceeding via a different route, and Democrats, as the incumbent party in Washington, would suffer the political consequences of a first-ever government default on its obligations or any other economic fallout from failure to act. And that’s to say nothing of the very real suffering that would quickly ripple through the U.S. and ultimately the global economy.
It is understandably maddening to Senator Schumer and other Democratic senators that their Republican colleagues are playing chicken with the economy, but that’s no reason to play along. Democrats should accept without further delay Senator McConnell’s offer of a streamlined process to pass a debt ceiling increase via reconciliation.