Barack Obama was fed up, but Joe Biden was incredulous.
It was the summer of 2011, and House Republicans seriously weren’t going to negotiate anymore, and the American economy looked like it was on the verge of implosion thanks to an impending default on U.S. government debt. With the Treasury running out of room to borrow money, Republicans refused to raise the so-called debt ceiling without concessions. President Obama had held well-publicized White House negotiations to avert the crisis with congressional leaders, and he’d gone back and forth with GOP House Speaker John Boehner to little avail.
But Vice-President Biden — the old veteran of the Senate — had followed up his own ill-fated talks with Capitol Hill honchos by organizing yet another round of secret but intense proposal-trading with Mitch McConnell. And when it still all fell apart thanks to the demands of right-wingers in the House, he could scarcely believe it. There was almost always a deal to be made, in Biden’s view, as long as the other side had the patience to hear him out.
A dozen years on, many Obama-administration alumni still call that summer the low point of their first term. But now, with GOP intransigence once again threatening a debt-ceiling debacle, President Biden is singing a much harsher tune than his younger self. The very idea of negotiating, he’s insisting, is off the table.
This isn’t the product of a sudden pivot, nor a Trump-age awakening, nor even some new fiscal paradigm. After all, the Republican-led Congress hiked or suspended the debt ceiling four more times before Obama and Biden left office, and they did it sans global-economy-threatening brinkmanship. Biden’s change of heart is simpler: “Everyone knows that a default would be a terrible error that would be very costly for the United States,” UC Berkeley economist Carl Shapiro, who was a member of Obama’s Council of Economic Advisors that fateful summer, told me. “So this is all about politics, not economics.” And as Jason Furman, who was deputy director of the National Economic Council during the crisis, put it last week, “After what we learned in 2011, we switched to a new way of approaching the debt limit.”
That year’s federal-government credit-rating downgrade, collapse in consumer confidence, and spiking interest rates are front of mind for Biden’s White House, but so is the reality that we still have a few more months before we reach that point — time best used forcing Republicans to bend. Biden’s charges have thus been unbudging in their contention that addressing the debt ceiling is unquestionably Congress’s job. The onus, they insist, is on Speaker Kevin McCarthy to find a solution. Their bet is that the Republicans will feel the political pain as the White House makes its implicit case more explicit: that the GOP is simply engaged in cynical hostage-taking to detonate the economy when Democrats hold the White House.
It hasn’t been a terribly difficult case to make, since some congressional Republicans have been open about drawing inspiration from the last time. “The debt ceiling has proven incredibly effective. In 2011, by standing strong on the debt ceiling, the majority in the House forced passage of the Budget Control Act, the most significant constraint on federal spending in modern times,” Senator Ted Cruz said last week, a statement that reminded plenty of Democrats of his failed gambit to shut the government down in 2013 to try and force Obama to defund Obamacare. As one White House spokesman put it in a messaging email, “House Republicans plan to set off a crisis that reverses the job gains we’re now experiencing, kills businesses, and decimates 401(k)s unless they can cut Medicare and Social Security.”
It’s all a long way from when Obama saw serious opportunity in a budgetary “Grand Bargain” with Boehner, both on its perceived policy merits and because of the prospect of winning a bipartisan economic agreement to kickstart his re-election campaign. At least at the beginning, the negotiations involved substantive proposals to shift revenue sources and cut social programs. They only fell apart when it became clear that Boehner couldn’t get his restive conference members to agree to any tax increases at all, no matter how much Obama conceded in cuts. That left the two parties with no choice but to delay real action, and Democrats submitting to excruciating budget slashes down the line.
Back then, “we saw some upside to negotiation, and considerable upside in a grand bargain,” said Furman, who went on to serve as Obama’s chair of the Council of Economic Advisers and now teaches at Harvard. Then the negotiations failed. “The lesson is nothing good came from that brinkmanship.” This time, Republicans are only offering Biden a debt-ceiling increase and no concession of their own, and they’re likely to demand significant spending cuts.
Biden does have distinct political advantages over 2011 Obama. For one thing, while his predecessor was still reeling from a midterm “shellacking,” Biden is fresh off far-better-than-expected midterms. The results left Republicans with a tiny margin in the House, and therefore little room to maneuver. McCarthy is beholden to the whims of any member who wants to make his life difficult, and this fact is well known to the public ever since his embarrassing journey to the speakership became must-see TV. Boehner’s inability to control his members, by comparison, came as a nasty surprise mid-negotiation.
As a result, Biden seems sure the GOP will face the blame for any standoff. And those around Biden now understand that McCarthy still has his own mountain to climb to even get his caucus to align on what it wants from the coming fight. While he has said he won’t demand cuts to Medicare and Social Security, that hasn’t stopped Biden’s White House from publicly insisting that McCarthy’s party will end up in that politically toxic spot. Some of his members have started down that path and he may have little choice but to cave to them.
The Biden team is also leaning away from a public-facing tactic that failed 12 years ago. Then, the Obama administration tried ramping up pressure on GOP members by spooking them and the public about the consequences of default. (Jerome Powell, the current Federal Reserve chairman who was then out of government, got in on the effort with a presentation to Hill Republicans.) Yet as Furman explained, such efforts could be read as spelling out why Republicans should raise the debt ceiling, but one could also interpret them as saying, “Well, if it’s so bad, you should make some big concessions to avoid it.”
Still, none of the tactical changes address the ultimate variable: individual GOP rebels who see little incentive to go along, either with Biden or their leader, McCarthy. That explains Washington’s underlying sense of unease. It’s also the reason that analysts and pundits have started resurfacing a handful of unorthodox ideas for executive actions Biden could ultimately take to escape the crisis, no matter their uncertain political or short-term economic fallout.
Of course, something similar happened in 2011. Then, the Treasury Department secretly began to explore the concept of prioritizing its debt payments to try and dodge the blow of a default. But no one took talk of minting a $1 trillion platinum coin seriously, not least because then–Treasury Secretary Tim Geithner was puzzled, if not bewildered, the first time someone surfaced the idea in a private meeting, according to an official who witnessed the exchange.
Then, like now, some sort of negotiated solution always looked like the most plausible, if pitfall-laden, outcome.
“There’s an 80 percent chance the whole thing gets settled in advance of the deadline,” Furman estimated. The agreement would probably involve “some fig leaf, like some commission to talk about how terrible the debt is” or a parallel negotiation about discretionary spending that Republicans could claim as a victory, he said.
Still, that math isn’t quite reassuring. The economist pegged the prospect of breaching the deadline by a week or two as “a sizable chance — maybe even 20 percent.”