“Considerable deja vu:” The reason we’re stressed about the debt ceiling — again

The reason we’re stressed about the debt ceiling — again.

This spring, Congress finds itself standing at a familiar precipice. Once again, if lawmakers don’t agree to suspend or raise the debt ceiling, the federal government risks defaulting on its loans, which would likely cause a massive economic crisis. On Wednesday, House Republicans passed a bill they view as an opening salvo to negotiations, as both parties stare down a stalemate.

It’s a position that congressional lawmakers have been in many, many times before, and it’s one that they have to resolve ahead of a default date that could come as early as June.

At issue is not whether the debt ceiling — a legal cap on how much the US can borrow — should be raised, but how. Democrats, led by President Joe Biden, insist that Congress pass a “clean” debt ceiling increase that does not include any trade-offs to guarantee its passage. House Republicans, meanwhile, are eager to pass spending cuts in exchange for approving any debt ceiling increase, with some saying they’re unwilling to compromise on this point.

This standoff has led to concerns that the US could come dangerously close to actually defaulting, which it came within 72 hours of doing in 2011. As that experience made clear, the fact that the debt ceiling is spurring a stalemate is nothing new.

“There is considerable deja vu,” David Kamin, an economic adviser for the Obama administration, previously told Vox.

The reason Congress continues to land in the same place is that raising or suspending the debt ceiling, much like funding the government, is something it must address on a regular basis. Every few years or so, Congress has to either increase or suspend the country’s debt ceiling as it accrues more debt. This debt comes from covering government expenses including paying for the military, health care programs, and Social Security.

If it fails to address the debt ceiling, Congress would ruin the US credit rating and put its ability to pay its bills in doubt. That would likely trigger a domestic economic crisis, if not an international one. Were the US to default, interest rates would probably go up and unemployment would increase, potentially putting thousands or even millions of people out of work.

Because it’s must-pass legislation and requires the backing of both chambers, the party that’s out of power in the White House or in the minority in Congress has often used this measure as leverage to extract policy concessions or send a political message. That has erased any incentive to reform the process, even though Congress could do away with the debt ceiling if it wanted to. (More on that below.)

“I’m not sure there’s all that much desire to take it off the table in terms of members of the minority losing this political thing they have to fight with,” University of Texas Austin government professor Alison Craig previously told Vox.

In recent years, Republicans have been more aggressive in demanding concessions from Democratic administrations in exchange for their support for a debt ceiling increase, though both parties have utilized such votes in the past to make a point. That’s left the US in a dangerous cycle in which the minority party tries to squeeze every concession it can out of the process, debt ceiling negotiations go down to the wire, and any miscalculation on the part of lawmakers could inadvertently cause a default.

What is the debt ceiling and why does Congress have to raise it?

As Vox’s Dylan Matthews has explained, the United States is unique in having a debt limit that lawmakers need to suspend or raise every few years.

A debt limit was first established in 1917 in order to “make it easier to finance mobilization efforts in World War I,” per the Brookings Institution. That enabled the US government to take on debt without Congress approving each individual expenditure, which meant it could more quickly and efficiently finance the military. Since the 1960s, Congress has raised the debt limit more than 70 times; 20 of those times have been in the last 23 years. The debt limit effectively caps how much the US is able to borrow from federal agencies, foreign countries, and banks, so if the country defaults, it isn’t able to pay its bills.

Currently, the US debt stands at roughly $31.46 trillion, and is a product of the expenses the government faces on an annual basis exceeding the country’s revenues. (Technically, the US already hit the debt ceiling in January, and the Treasury Department has been employing accounting tactics known as “extraordinary measures” to buy some more time.)

This debt has been accrued under both parties: During the Trump administration, the national debt rose roughly $7.8 trillion, and under the Biden administration so far, it’s gone up about $3.7 trillion.

Why is the debt ceiling so contentious?

While there are concerns that this year’s standoff could be the most dangerous yet, political threats about the debt ceiling have been around for a long time.

In the 1950s, Republican President Dwight D. Eisenhower navigated standoffs with Democratic members of Congress about increasing the debt ceiling. Much as Republicans do today, Senate Democrats argued that the federal government should focus on reducing its expenditures rather than raising the debt cap. By withholding their support for a higher ceiling, lawmakers forced the administration to consider serious spending cuts.

Since then, the debt ceiling has been weaponized by members of both parties. Republicans, for instance, like to point out that Biden was among the senators who opposed raising the debt limit in 2006 when Republicans had congressional control. (Democrats did not filibuster the final vote on the debt limit that year, however.)

“My vote against the debt limit increase cannot change the fact that we have incurred this debt already, and will no doubt incur more,” Biden said that year. “It is a statement that I refuse to be associated with the policies that brought us to this point.”

The debt ceiling fight in 2011 was a turning point, however, with some lawmakers actually seeming open to a possible default. That year, Republicans balked on increasing the debt limit and refused to do so until President Barack Obama agreed to key spending cuts, some of which they ultimately secured. The US got so close to default that year that it led Standard and Poor’s to downgrade the country’s credit rating, a move that prompted stocks to drop at the time.

“I’d definitely say 2011 was a step forward in how aggressively the debt ceiling was weaponized to secure partisan policy goals,” Josh Bivens, the director of research at the Economic Policy Institute (EPI), previously told Vox. “I’d say 1995 was also important; [House Speaker Newt] Gingrich threatened this but didn’t take it as far as the GOP did in 2011.”

In the years since, Republicans have become more aggressive in holding debt ceiling increases hostage to either elicit a policy demand or send a message. According to data analysis Aaron Blake did for the Washington Post, that pattern is noticeable across administrations, with Republicans much more likely to rail against the debt ceiling increase if a Democrat president is in charge, with Democrats doing the same to a lesser degree:

In the 10 debt ceiling votes under a Republican administration, an average of 65 percent of House Republicans and 74 percent of Senate Republicans voted in favor of adjusting or suspending it. But in Democratic administrations, those numbers decline to 24 percent and 20 percent, respectively.

Under Democratic presidents, an average of 86 percent of House Democrats and 98 percent of Senate Democrats voted for debt ceiling increases. Under Republican presidents, those numbers drop to 51 percent and 58 percent, respectively.

The willingness to filibuster the debt ceiling, experts say, is also a sign of how partisan many legislative fights have become — even ones where the entire US economy hangs in the balance.

Because majorities in Congress have narrowed in recent years for both parties, there’s greater incentive to try to stymie the other party’s efforts since it could offer an advantage in the upcoming elections.

“It’s much more common to exert all procedural options to something like appropriations or the debt ceiling. There’s much more brinksmanship. It’s expected that every September 30, we’ll be approaching a shutdown. It’s expected that every October, we could approach a default,” Josh Huder, a senior fellow at Georgetown’s Government Affairs Institute, previously told Vox. “It’s using all of the legislative tools to put the majority party in a bad position, for electoral gain.”

Congress — or the president — could just get rid of the debt ceiling

The US government doesn’t have to work this way.

Congress could pass legislation doing away with the debt ceiling, and the president has options to ignore it as well, though they’d likely prompt legal challenges. As Vox’s Dylan Matthews has reported, the president could invoke the 14th Amendment and ignore the debt limit, or Congress could approve an increase to the debt cap that’s so high it basically nullifies the ceiling.

Abolishing the debt limit altogether would prevent either party from using this process as political leverage. Doing so would greatly reduce the uncertainty that comes around every time there’s a deadline like this and prevent significant market volatility that results.

“There are zero downsides to getting rid of the debt ceiling. It is utterly meaningless as a policy guide or institution; it is good only for gridlocking government. And, in the modern age, gridlock is an enormous problem, given the huge pressing needs policymakers should be addressing,” said the EPI’s Bivens.

Other economic experts note that eliminating the debt ceiling could take away an opportunity for Congress to debate fiscal policy. But many feel like that’s a moot point, given debt ceiling standoffs are rarely about any specific spending anymore, but rather about weakening the party in power.

“The debt limit was one of those stoppage points that has encouraged and allowed for conversations over how to address health care costs, tax policy, how to address fiscal reforms,” Marc Goldwein, policy director at the Committee for a Responsible Federal Budget, previously told Vox. “We haven’t seen that in any of the recent increases. An argument against repealing it is that you lose that stoppage point.”

Rather than do away with the debt limit altogether, some experts have proposed options like giving the president the ability to propose a suspension that Congress would need to override if it disagreed, making it tougher for legislators to jam up that process. A proposal that Shai Akabas of the Bipartisan Policy Center supports would pair this proposal with a mandatory debate on fiscal policy to force Congress to confront spending issues.

It’s unlikely there’s enough political will to make any of these changes happen. Instead, it seems as though lawmakers are comfortable getting right up to the brink — and running the risk of a default again and again.

Update, April 26, 6:30 pm ET: This story was originally published on April 26 and has been updated to include the outcome of a House vote on debt ceiling legislation.