Two developments related to the urgent task of raising or suspending the public debt limit occurred as this fateful week in Washington began: the first Senate draft of the FY 2022 budget resolution was released with no sign of debt limit provisions, and Treasury Secretary Janet Yellen urged Congress to deal with the debt limit on “a bipartisan basis” as it has done in the past. There is a remote possibility these two occurrences were not coordinated, but don’t bet a nickel on it. More likely, Yellen was offering cover on behalf of the Biden administration for a decision by congressional Democrats to play chicken with Republicans on the debt limit instead of taking responsibility for an unpopular increase that vulnerable House and Senate members fear. Somebody’s got to do it, of course, since a failure to act on the debt limit would eventually lead to a debt default that could devastate financial markets and fatally undermine the current fragile economic recovery.
As I explained recently, debt limit increases are uniquely subject to a partisan blame game:
Because the public closely associates the need to raise the debt limit with the decisions that made it necessary (always blamed on the “other side”), debt limit increases are consistently unpopular, and not only with the Republicans who are typically moralistic about the very idea of debt. Higher-income Americans who are likely to have market-sensitive assets, and federal employees whose pay is threatened by a default, are about the only segments of the public who are positive about debt limit increases. So politicians of both parties look for every opportunity to vote against such measures, or at a minimum to make sure the “blame” is shared across party lines.
At present, congressional Republicans are inclined to take a hard line against doing their duty to avoid a catastrophic debt default, in part because pretending to care about deficits and debt is again in high fashion in the GOP after four years of indifference to the fiscal profligacy of the Trump administration. Mitch McConnell has made it very clear that no one should expect a single Republican vote to raise or suspend the debt limit, and Yellen is essentially scolding him and other Republicans for treating this as a partisan matter:
″The vast majority of the debt subject to the debt limit was accrued before the administration taking office,” Yellen told Congress in her letter on Monday. “This is a shared responsibility, and I urge Congress to come together on a bipartisan basis as it has in the past to protect the full faith and credit of the United States.”
The alternative, which at least for the moment Democrats are rejecting, is to include a debt limit increase in the upcoming FY 2022 budget reconciliation legislation that is widely expected to pass both houses on a strict party-line basis (and that cannot be filibustered). Unless Democrats change their minds very soon, that means action on the debt limit will have to proceed via “regular order” (i.e., normal legislation subject to the Senate filibuster) at some time before the “extraordinary measures” taken by Yellen to head off a debt default are exhausted, which will probably occur in October or November. Typically, that occurs by attaching a debt limit provision to must-pass legislation like appropriations bills needed to prevent a government shutdown. Indeed, the debt limit suspension that was in place until July 31` was part of a two-year deal signed by Donald Trump in 2019 to avoid any such funding “cliff” from occurring before the 2020 elections.
In 2019, of course, control of the federal government was divided. Two years later, Democrats control both the executive and legislative branches, which suggests to some Republicans that the public will blame calamities like a debt default or a government shutdown on Democrats. So while Yellen is absolutely right that every member of Congress should share responsibility for preventing a fiscal disaster, it’s unclear Republicans give a damn about it, which makes it a risky endeavor for Democrats to count on bipartisanship.
All we know for sure is that Democrats are putting off action on the debt limit for right now. But if the effort to guilt-trip Republicans into cooperating on this issue fails, things could get even crazier in the autumn than the fight over the upcoming reconciliation bill and appropriations already ensures.