The United States has yet again reached its borrowing limit, setting the stage for a broad fiscal debate that could be the defining issue of the 114th Congress.
The nation will again reach its statutory debt limit on Monday. Its return has sent the Treasury Department hunting for funds to continue paying the bills, as lawmakers begin strategizing over the issue behind some of the most pitched battles of President Obama’s tenure.
And experts believe the nation will be in danger of a catastrophic default sometime this fall — roughly overlapping with the deadline Congress needs to hit to avoid another government shutdown.
Exactly what Republicans could pair with a borrowing boost, and how hard they would push those demands, is the major question in and out of the party.
Republicans now enjoy the majority in both chambers. But with power comes responsibility, and the burden for raising the nation’s borrowing cap has historically fallen on the party in charge.
Aware of his party’s rocky record during previous standoffs, Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellThese Senate seats are up for election in 2022 WATCH: The Hill recaps the top stories of the week Effort to overhaul archaic election law wins new momentum MORE (R-Ky.) has repeatedly said he has no designs on a government shutdown or debt default. He reiterated that message earlier this month but also noted that some “other important legislation” could accompany a limit increase.
Some GOP lawmakers appear to be growing tired of high dramatics, especially after the party failed to halt the president’s immigration executive action by delaying funding to the Department of Homeland Security.
Sen. Jeff FlakeJeffrey (Jeff) Lane FlakeCruz to get Nord Stream 2 vote as part of deal on Biden nominees Democrats threaten to play hardball over Cruz's blockade Rubio vows to slow-walk Biden's China, Spain ambassador nominees MORE (R-Ariz.) said Thursday that the nation needed to come up with a long-term fiscal plan. But noting the GOP’s failed effort on immigration, he openly questioned using the debt limit to advance that debate.
“The last high-wire act didn’t turn out too well,” he said. “It’s a tough hostage to take…I’m always for anything that gives us a discussion on what to do long term, but I just don’t know if this is going to be the place.”
Senate Finance Committee Chairman Orrin HatchOrrin Grant HatchMeet Washington's most ineffective senator: Joe Manchin Lobbying world Congress, stop holding 'Dreamers' hostage MORE (R-Utah) also seemed unenthused about another pitched debt limit battle, echoing Lew’s argument that a borrowing boost does not curtail spending already authorized.
“The debt ceiling is kind of a phony issue anyways,” he said. “Whatever it takes to not shut the place down, I’m all for.”
But other Republicans still view the need to raise the limit as a critical juncture to push fiscal priorities, and make the administration pay attention to their priorities.
“I’ve consistently been one of those who’ve felt that we should use the debt ceiling as a vehicle to drive further reforms. I would like to see that,” said Sen. Mike CrapoMichael (Mike) Dean CrapoThese Senate seats are up for election in 2022 Alabama GOP gears up for fierce Senate primary clash Senate Republicans call on Biden to lift vaccine mandate for truckers crossing Canadian border MORE (R-Idaho).
And House Budget Committee Chairman Tom Price (R-Ga.) has raised the idea of reviving the “BoehnerJohn Andrew BoehnerDemocrats eager to fill power vacuum after Pelosi exit Stopping the next insurrection Biden, lawmakers mourn Harry Reid MORE Rule,” demanding a dollar in spending cuts for every dollar in extra borrowing.
A McConnell spokesman said discussions over the limit are ongoing, but did not offer specifics.
With the limit looming, the Treasury Department has already begun deploying its oft-used set of “extraordinary measures” – the tools it can use to free up space under the nation’s borrowing limit so it can continue to pay bills due.
On Friday, Treasury Secretary Jack LewJacob (Jack) Joseph LewThe Hill's Morning Report - Biden argues for legislative patience, urgent action amid crisis On The Money: Senate confirms Yellen as first female Treasury secretary | Biden says he's open to tighter income limits for stimulus checks | Administration will look to expedite getting Tubman on bill Sorry Mr. Jackson, Tubman on the is real MORE told lawmakers he was beginning to use those measures, and urged Congress to maximize speed and minimize drama when it comes to another boost.
Lew also warned Congress not to view the borrowing cap as a “bargaining chip,” indicating that the White House will again be looking for a “clean” debt limit increase, free of other policy prescriptions from GOP lawmakers.
Some Republicans believe the administration’s position is untenable, particularly given the new makeup of Congress.
“The vast majority of the American people would say at some point we need to balance,” said Sen. James Lankford (R-Okla.). “The White House is in a tough position if they say to endlessly raise the debt ceiling with no consequence.”
Alec Phillips, a political economist for Goldman Sachs, said investors see little reason to believe that this latest debt limit debate will be worse than any other in recent memory.
“My own view is that recent comments from Republican leaders imply it might be a little bit smoother than some of the previous debates,” he said.
How much success Republicans find in agreeing on a budget could be a key indicator for the debt limit fight. Both chambers are preparing to unveil their budget plans in the coming days, and if Congress can unify around a single budget, it opens the door to a debt limit plan exclusively backed by Republicans.
If Congress agrees on a budget, that opens the door to handling the limit via budget reconciliation, which only requires a simple majority in the Senate.
That means that Republicans in the House and Senate could theoretically send their own debt limit package to the president, and dare the White House to reject it.
Phillips said such a move would be uncharted territory for markets.
Congress agreed to suspend the nation’s borrowing limit until March 16 at the beginning of 2014. Under that agreement, all government borrowing that occurred during the suspension period would automatically be included in the new limit.
The end result is that as of Monday, the nation’s borrowing limit is roughly $18 trillion. And the government is already at that cap.
The good news for lawmakers is that they will have plenty of time to debate the issue. The Congressional Budget Office estimates the nation will not be in danger of missing any payments until October or November.