Time to Get Serious About the Debt Limit

Time to Get Serious About the Debt Limit

By Jonathan Bernstein 

Bloomberg

4 min

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jonathan bernstein

Pay the bills.

Pay the bills.

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I’m starting to worry that Democrats are seriously botching the debt limit. Remember, the debt limit, set by law, prevents the government from borrowing money to pay for spending commitments that Congress and the president have already made. It’s going to need to be raised at some point this fall. But if Democrats have a strategy for doing so, I don’t see it.

The best plan would’ve been to include an increase in the pandemic-relief bill that passed at the end of the previous Congress. But perhaps Democrats didn’t have the leverage at that point. The second-best choice would’ve been to raise the limit as part of the next relief bill, passed through the reconciliation procedure earlier this year. That didn’t happen either.

Many commentators assumed that a debt-limit increase would be in the reconciliation bill that the Senate is now drafting, which will contain the spending agenda that didn’t make it into the bipartisan infrastructure bill. But Politico’s Caitlin Emma and Jennifer Scholtes report that, no, it’s not going there, either. Congress scholar Molly Reynolds speculates that timing is the problem — after all, the debt limit will have to be raised in time to avoid the threat of a government default, and Democrats aren’t certain that the reconciliation bill will be ready in time. 

Evidently, the plan is to combine an increase with a short-term spending bill that needs to pass by the end of September to prevent a government shutdown, and Democratic lawmakers are telling reporters that they expect to get some Republican votes for it, which seems extremely unlikely. In fact, they don’t really need Republican votes; they just need Republicans to refrain from filibustering and allow the bill to pass with only Democratic votes. But that seems unlikely as well.

What happens if Republicans just say no?

As long as the debt limit doesn’t need to be raised until October or later, they could just force the issue, accepting a shutdown as a way of demonstrating Republican irresponsibility. That seems … unwise. Imposing short-term costs on individuals who would be affected directly, along with medium-term costs on the economy, in exchange for the possibility of a public-opinion boost that everyone will have forgotten well before the midterms, is a bad bargain even if it works. The other option would be to rush yet another budget resolution through and put the emergency measures into another reconciliation bill. Or perhaps add the debt limit to the infrastructure bill after all, if it’s ready to go. 

What doesn’t seem plausible is giving in to Republican demands. Even if Democratic congressional leaders and the White House wanted to, it’s hard to see where the votes would come from to pass a bill that increased the debt limit while cutting entitlements — it would lose far more liberal Democrats than it would gain Republicans. 

The only other way I could see this working would be if all 50 Democratic senators wanted to use a bill to keep the government running and avoid a default as an excuse to eliminate the filibuster. But there hasn’t been even a hint that Senator Joe Manchin would have any interest in that. If that’s the plan, they’re doing a good job of keeping it quiet. 

This all seems like a lot of unnecessary risk. The debt limit is a foolish, unnecessary law that should be repealed anyway. But Democrats have known this moment was coming for months. If repealing the debt limit isn’t on the table — and that probably can’t be done through reconciliation — they should at least provide for four years’ worth of borrowing room. Better still, they could set the new limit so high that it effectively makes further increases unnecessary. Perhaps that’s a tough vote, but it’s unlikely there are any voters who would ignore an attack ad over a simple one-year debt limit increase but be outraged about a larger one. 

In other words: It’s always been locked in that Democrats would have to take one tough debt-limit vote. But whatever minimal risk that involves, the real danger is that they come close enough to a default to harm the economy — assuming they wouldn’t actually allow a default.

There is a plan, right?