For Biden, negotiating the debt ceiling may be the safest option
As the full faith and credit of the U.S. government hangs in the balance, Democrats and Republicans are locked in a stalemate over raising the country’s borrowing limit. Republicans are unwilling to do so without significant spending cuts, which Democrats say shouldn’t be a condition for the U.S. paying its bills.
In this argument, Democrats occupy the high ground. Both Democratic and Republican presidents accrue debt, and both parties are responsible for ensuring that the U.S. makes good on its financial obligations. The majority of Americans (58 percent) also agree with the Democrats’ position and say that raising the debt ceiling and spending cuts should be addressed as separate issues, per a recent ABC/WaPo poll.
Notwithstanding this, President Biden — whose approval rating sank to a new low this week of 36 percent, according to an ABC/WaPo poll — can’t afford, from a political perspective, to allow the U.S. to inch closer to default as he prepares to run for reelection.
A breach of America’s financial obligations would be catastrophic for the U.S. and world economies, and many economists believe it would tip America into a recession, which Biden will bear the brunt of in 2024, fair or not.
And even though Americans agree with the Democrats’ position, voters would likely hold both parties accountable for a default: 39 percent would blame Congressional Republicans, while 36 percent would blame Biden, per the aforementioned survey.
Biden ultimately has an obligation — and an interest — to be the adult in the room and strike a deal with House Speaker Kevin McCarthy (R-Calif.), even if it means backing away from Democrats’ initial objection to conditioning raising the country’s borrowing limit on spending cuts.
It should also be noted that Biden, as a senator, pushed for restraining federal spending as part of a deal to raise the debt limit. Then-Sen. Biden advocated for a tradeoff that would lift the debt ceiling and protect vital social programs while prioritizing a reduction in government spending.
In no way am I arguing that the president should acquiesce to all of the GOP’s demands for cuts, many of which are untenable, such as adding work requirements to safety net programs. However, as the U.S. peers over the fiscal cliff, Biden would be wise to give House Republicans some of what they are asking for in exchange for averting a fiscal — and political — disaster.
The president indicated openness toward a deal on Tuesday after a meeting at the White House with the top four congressional leaders, admitting that he was open to some of the House GOP’s proposals, such as rescinding unobligated COVID-19 funds.
Even if House Republicans refuse to compromise, Biden coming to the negotiating table allows him to position himself as responsible, pragmatic, and conciliatory — unlike Republicans, who are playing politics with the U.S. economy and making extreme demands. Biden’s ability to draw this contrast will be critical to his reelection, especially as all signs are pointing to a rematch with Donald Trump in 2024.
During a CNN town hall on Wednesday, Trump, the leading candidate for the 2024 Republican presidential nomination, took an “all or nothing” stance on the debt ceiling issue by encouraging GOP lawmakers to allow the U.S. to default unless Democrats agree to all of their demands.
“I say to the Republicans out there — congressmen, senators — if they don’t give you massive [spending] cuts, you’re going to have to do a default,” Trump said. He later claimed that economists’ warnings about the catastrophic consequences of a default were overblown, or, in his words, “psychological more than anything else.”
Speaker McCarthy took a similar position after the White House meeting Tuesday by refusing to take default off the table. He is the only high-profile leader – which includes Biden, Majority Leader Charles Schumer (D-N.Y.) and Sen. Mitch McConnell (R-Ky.) and House Minority Leader Hakeem Jeffries (D-N.Y.) — to do so.
Make no mistake, McCarthy and Trump are playing a dangerous game of political chicken designed to push Biden to the brink, in light of the fact that roughly 6 in 10 Americans already disapprove of the president’s handling of the economy, per the Real Clear Politics average.
Again, Trump and McCarthy playing politics with the U.S. economy is wrong and a regrettable situation. The debt ceiling was developed in 1917 to make it easier for America to borrow money but has been weaponized by the Republican Party in recent years to score political points at the expense of the health of the nation’s economy.
But Biden, being in a disadvantageous position generally and on the economy especially, cannot let this fight play out much longer, or let his job numbers fall further.
Beyond the politics, this standoff is already producing real economic consequences: According to Bloomberg, the cost of insuring against a U.S. default is now higher than in emerging markets such as Brazil and Mexico.
As we inch closer to June 1st — the day the country will run out of money, according to Treasury Secretary Janet Yellen — Biden needs to come into the role he played as vice president in 2011, when he oversaw debt ceiling negotiations the last time Republicans held the U.S. economy hostage.
But unlike the 2011 fight — which was resolved at the eleventh hour, leading to the first credit rating downgrade for the U.S. government in history — Biden can’t afford to wait for House Republicans to blink.
Douglas E. Schoen is a political consultant who served as an advisor to President Clinton and to the 2020 presidential campaign of Michael Bloomberg. His new book is: “The End of Democracy? Russia and China on the Rise and America in Retreat.”
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