Senator Mitch McConnell had a message for Americans increasingly concerned that the economy could collapse if the federal debt ceiling is not raised: Just relax.
“Look, I think everybody needs to relax,” McConnell, the Kentucky Republican and minority leader with deep experience in debt limit clashes, told reporters at home earlier this week. “Regardless of what is said about the day-to-day conversations, the president and the president will reach an agreement. Ultimately, it will go through a bipartisan vote in the House and Senate. The country will not default.”
This can be a case of easier said than done. While McConnell, President Biden and spokesman Kevin McCarthy have repeatedly assured Americans that there will be no defaults, that assurance looks a little shakier with just over a week left until the US Treasury runs out of cash to pay. your obligations.
Even if negotiators agree to a deal soon — an outcome that appeared within reach but had yet to materialize as talks continued on Friday — there is still much to be done, not least of which is getting House approval and in the Senate. That outcome is far from certain, given growing unrest – and some direct opposition – from both the right and the left. At this point, no one can be absolutely certain that the United States will not fall off the default precipice, even if no one involved wants that to happen. Time is short.
“Nobody can guarantee there won’t be a default, even though the clock is ticking fast here,” said G. William Hoagland, a former Republican budget guru on Capitol Hill who is now senior vice president. at the Bipartisan Policy Center. “We are on thin ice in style.”
Traders were given some breathing room on Friday afternoon by the Treasury Secretary’s announcement that the default deadline had changed four days later to June 5. urgency to seal a deal.
“We’re well within the window of being able to pull this off, and we’ve got some really tough terms to come to terms with in these closing hours,” said Rep. Patrick T. McHenry, a North Carolina Republican and one of McCarthy’s top negotiators. “We are returning to final and important matters, and this is simply not resolved.”
Since the impasse began, Biden and congressional leaders have tried to quell concerns that a default would occur, essentially saying it was unthinkable because Congress narrowly avoided defaulting earlier. After one of the high-level meetings at the White House, Senator Chuck Schumer, the New York Democrat and Majority Leader, celebrated the fact that all four leaders said default was out of the question.
Part of his motivation for offering these constant reassurances was to bolster his own strength, calm the public, and keep financial markets from crashing as negotiations progressed.
But President Biden changed his tune slightly during his visit to Japan this past weekend, saying for the first time that if Republicans insisted on pushing the issue to the max, maybe default was an option after all.
“I can’t guarantee that they wouldn’t force a default by doing something outrageous,” Biden told reporters. “I cannot guarantee that.”
Representative Hakeem Jeffries, the New York Democrat and Minority Leader, expressed a similar sentiment when asked this week whether he could still be sure the government would not default.
“Not with this group,” he said, referring to Republicans, some of whom he suspects wouldn’t mind the financial chaos resulting from a default if they thought it might help them politically in 2024.
McCarthy, the House leader and California Republican, has also repeatedly said there would be no default and on Friday he emphasized that he believed a positive outcome would be the result.
“I’m totally optimistic,” he told reporters as talks continued with no apparent breakthrough.
One way for McCarthy to say that a default could be avoided is for the Senate to pass and the president to sign the measure that Republicans passed in the House, raising the debt limit, making big budget cuts and reversing other Biden administration initiatives. But this is unlikely to happen even if the Treasury runs out of money. McCarthy also ruled out a short-term emergency lifting of the debt ceiling.
Even a deal between House Republicans and Mr. Biden would not end the drama; in some respects, it would be just the beginning.
House Republicans have a 72-hour rule for the time between when legislation becomes public and when it must be voted on, a timeline that brings the final showdown closer and closer to the Treasury deadline in early of June.
Furthermore, with far-right elements of the Republican conference joining progressive Democrats in expressing reservations about the deal taking shape, McCarthy and Jeffries may have to thread the needle to produce the necessary votes from both sides to win passage of the agreement. .
McCarthy and his leadership team will have to gauge with extreme accuracy the number of Republicans committed to voting on any final budget deal with an increase in the debt limit. Then they will need to tell Jeffries the number of votes the Democrats need to produce to ensure that at least 218 lawmakers support the package.
A miscalculation can spell disaster. With the country in a dire financial crisis in September 2008, the House surprised the Bush administration by not passing its bank bailout program. In a chaotic turnaround on the House floor, the measure failed, as many Republicans refused to support it despite presidential appeals, and some Democrats also balked. The stock market dropped in real time as the voting unfolded. Four days later, shaken House members returned and passed the bill with a few changes.
Some believe it may take a similar scenario now to pass the debt limit plan through Congress – a failed vote and a market crash that underscores the economic fallout of a default and spurs lawmakers to act. Others would rather it not come to that, given the potentially serious ramifications of even a brief default.
“I have an optimistic view that this would not happen, but the more time that passes, the more likely it is for me,” said Hoagland, the budget expert. “Time has run out to do that, but I’m just praying that default doesn’t happen.”
Lucas Broadwater contributed reports.