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Politics & Policy

The Democrats’ Debt-Ceiling Debacle

Senate Majority Leader Chuck Schumer (D., N.Y.) talks to reporters at the Capitol in Washington, D.C., July 13, 2021. (Elizabeth Frantz/Reuters)

Thursday’s deal to put off the debt-ceiling fight for a couple of months was a fittingly equivocal and inconclusive turn in the continuing battle over the Biden agenda. Its enactment involved a familiar sort of Republican collective-action drama, but the deal ultimately reflects above all the continuing division of the Democrats, which has left them saying and doing some pretty odd things this fall.

The deal compelled the Democrats to do something they wanted to avoid by putting a number on a debt-ceiling increase — albeit only a two-month increase, and therefore a deceptively modest number of $480 billion. And it compelled the Republicans to do something they wanted to avoid by permitting a debt-ceiling increase through a simple majority vote rather than through the budget reconciliation process — albeit, again, only a two-month increase, which lets them take away the Democrats’ claim that they don’t have the time to use the reconciliation process for a bigger increase next time. The deal did also give the Democrats something they wanted, namely a fight with Republicans that let them stand together as a party for a moment and mask their intense internal disagreements. And it gave the Republicans something they wanted, namely a contentious delay that further complicates the Democrats’ efforts to pass a huge spending bill on a party-line vote. So wins and losses for all; it’s a real deal.

And yet, the fact that this fight happened at all reflects the challenges the Democrats have faced in holding together in pursuit of a partisan agenda with what is pretty much the narrowest congressional majority in history.

On its face, this fight happened because Republicans wanted no part in raising the debt ceiling to make room for a massive, partisan spending bill that the Democrats are advancing in a tied Senate. Mitch McConnell’s case was straightforward: If the Democrats are going to enact an aggressive progressive agenda on their own, they should have to own what’s involved in governing right now.

That’s not a self-evident argument, but it’s an entirely reasonable one, and a fairly common one. Sometimes (as in the Trump era), the parties reach some kind of deal on the budget that lets them also reach a deal on raising the debt limit. But sometimes (as in those portions of the Bush and Obama eras when one party controlled the presidency and both houses) the party in power has to carry the burden of raising the debt ceiling to finance its agenda on its own.

In 2006, when the Democrats left it to Republicans to raise the debt ceiling on their own, Senator Joe Biden articulated the logic of this view very plainly on the floor of the Senate. He said that while it was true that the debt ceiling partially involved authorizing future borrowing to support past spending commitments, the amount of needed borrowing it assumed was also a function of the forward-looking agenda of the party in power, and that in both respects his aim in opposing an increase was not to cause a default but to register his disapproval of the direction of policy in Washington, knowing that the party in power would take care of the debt ceiling. Speaking of the national debt, he said:

The President’s budget plans will bring that number to $11.8 trillion at the end of the next 5 years. This is a record of utter disregard for our Nation’s financial future. It is a record of indifference to the price our children and grandchildren will pay to redeem our debt when it comes due. History will not judge this record kindly. My vote against the debt limit increase cannot change the fact that we have incurred this debt already, and will no doubt incur more. It is a statement that I refuse to be associated with the policies that brought us to this point.

Now, as the Democrats try to enact a budget plan that would require the debt ceiling to rise past $30 trillion, a similar logic surely holds for Republicans.

The Democrats know that, and they also recognize that a fight over the debt ceiling (let alone two such fights) can’t help but delay and distract them from their attempts to get their party united around a big spending bill that will require every Democratic vote. They could have avoided this fight very simply by including a debt-ceiling increase in their original budget instructions for the year. That would have been entirely normal (it has been done many times since the current budget process was created), and it’s plainly permitted. Section 310 of the 1974 Budget Act, which governs the rules for the reconciliation process, says that reconciliation each year can alter spending, revenue, and borrowing authority. That can all be done in one bill that combines all three functions, or it can be done in two or three bills that take up different ones.

So if the Democrats had included instructions for a debt-ceiling increase in their original budget resolution this summer, they could have either then included the increase in the huge reconciliation bill they’re working on or (since that bill is nowhere near ready, and the debt-ceiling deadline is here) just passed a one-sentence debt-ceiling increase by reconciliation at any point over the past couple of months. They decided not to do that.

Even once they decided not to include more borrowing authority in their original budget instructions, however, they could have achieved (as they likely still will achieve) the same thing at any later point by revising those budget instructions. Section 304 of the Budget Act allows for that. It would let them revise the year’s budget instructions and then pass that separate, one-sentence, debt-ceiling-only reconciliation bill that wouldn’t disrupt their spending and taxing reconciliation bill for the year in any way.

Why haven’t the Democrats done this, then? They have offered a series of answers in the course of the fall.

Some Democrats have said they just didn’t have time to get it done. But they have known since July that Republicans were not going to support a debt-ceiling increase, and that certainly gave them plenty of time to get things moving. It wouldn’t take more than a week or two.

Some Democrats said Republicans would disrupt their effort to do so with political stunts. Revising the budget resolution requires a process of open-amendments in the Senate that can be used to force embarrassing votes on the majority party, and then passing a new reconciliation bill involves another such process. But these so-called vote-a-ramas are actually subject to fairly strict rules of germaneness: Amendments have to be relevant to the subject of the underlying bill. On a big spending and taxing reconciliation bill that touches on countless policy areas, many sorts of embarrassing amendments would be germane. On a one-sentence debt-ceiling increase, it wouldn’t be easy to come up with many such amendments. And in any case, Republicans repeatedly said they were willing to reach an agreement to expedite the process.

Some Democrats said they wanted to suspend the debt ceiling rather than raise it to a particular dollar amount, out of fear that voting to raise the debt limit to more than $30 trillion would be used against them at election time. For most of the past decade, debt-ceiling increases have involved suspending the limit for a time rather than actually increasing it, and allowing the Treasury to borrow whatever was needed to meet government obligations during the suspension period. But you probably can’t do that through reconciliation. The Budget Act, in permitting changes to borrowing authority through reconciliation in Section 310, says a reconciliation bill needs to “specify the amounts by which the statutory limit on the public debt is to be changed” (emphasis added). That probably means the Senate parliamentarian wouldn’t allow a suspension of the debt ceiling in reconciliation — though in truth, no one has tried. So even though the Democrats are willing to spend trillions through a new reconciliation bill, they don’t want to admit that they also want to add trillions to the Treasury’s borrowing authority. It’s hard to see why they think one would draw attacks at election time but not the other, but this is clearly on the minds of some vulnerable Democratic senators.

Some others, especially in the past few days, seemed to think that the intensity and pressure of a debt-ceiling fight might enable Senate Democrats to destroy the legislative filibuster. If Republicans wouldn’t let the debt ceiling be raised by a simple majority outside the budget-reconciliation process, the specter of default, backed by a supportive press corps, could pressure moderate Democrats in the Senate to carve out an exception to the filibuster, which ultimately would spell the end of the filibuster. It’s hard to say how realistic this possibility ever really was, but some Republicans were certainly concerned about it on Wednesday, and ultimately the desire to offer a lifeline to senators Manchin and Sinema was part of why this deal happened. Many Senate Republicans are in constant, friendly contact with Manchin, and they wanted to help him out of a jam and to protect the filibuster.

But above all, I think the deal happened because the Democrats turned out not to have 50 votes for any solution to the problem. Until the middle of this week, Mitch McConnell was reasonably confident that by standing firm he could get them to just use the reconciliation process, and it was only on Wednesday that he came to realize that Chuck Schumer simply didn’t have the power over his conference to make that — or any other way forward for the Democrats — happen, even if he wanted to. What happened here was not so much the Democrats hanging together as it was the Democrats failing to reach 50 on anything. So although there was certainly an element of McConnell blinking, just as there was an element of Schumer doing so, the reason McConnell blinked was not that the Democrats managed to behave like a majority party but that it became clear to McConnell that at this point there is no majority party in the Senate.

The Democrats have been desperate to downplay and conceal their divisions throughout this process. And in one respect, having a Republican opponent against whom to unify over the past few days has helped them do that. But the way this has played out has nonetheless brought those divisions to the fore in a way that ought to terrify the progressive wing of the party — which has more to lose by getting nothing done this fall.

This week’s shenanigans don’t mean the Democrats won’t be able to pass the reconciliation bill they are working on, but they do call for lowering their odds of success, and at the very least for lowering expectations about what that bill will involve. Joe Manchin has already started pushing more aggressively over the past 24 hours to trim progressive ambitions, and we are likely to see more of that in the coming days. This suggests he’s willing to negotiate, but also that he is feeling strong and knows that the left wing of the party comes out of this mess feeling weaker.

Finally, it has to be said that this short-term deal has again revealed some of the weaknesses of Chuck Schumer’s mode of leadership. Schumer has not been good at bringing his conference together or planning even one step ahead. He tends to talk to senators separately rather than together and to do what he must to survive each day rather than advance toward a bigger goal.

I think Senate Democrats must still be digesting the absolutely bizarre signed, written arrangement Schumer reached with Manchin back on July 28 — which laid out detailed if (sort of) nonbinding terms for Manchin’s engagement with the Democrats’ social-spending bill that both senators then kept secret from most other Senate Democrats for two months. I can’t think of a more imprudent and downright strange move by a party leader in the modern Congress. You have to imagine that every Democrat will now want Schumer’s signature on an individualized statement of terms on every issue that matters to him or her, since after all every Democrat is the essential 50th vote on every party-line bill. And you have to assume that every Democrat will now also wonder if Schumer has made such an agreement in secret with every other Democrat on every such bill. It’s nuts, but it’s also a kind of encapsulation of Schumer’s leadership style.

The deal Schumer has now agreed to did get him out of a terrible jam for a bit. But it will probably create another moment of crisis in December, when spending for the year will run out around the same time that the debt ceiling will be reached again. Maybe the Democrats will have moved some version of their reconciliation bill by then, or at least maybe they will have come to some agreement on the outlines of such a bill. Maybe they will have gone through the process of raising the debt ceiling through reconciliation, too. Maybe. But this intense week has not helped them get there.

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Yuval Levin is the director of social, cultural, and constitutional studies at the American Enterprise Institute and the editor of National Affairs.

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