In 2011, John Boehner held the full faith and credit of the United States economy hostage—and it worked. The then House Speaker got billions of dollars of concessions from Barack Obama’s administration, helping set a precedent for future Republican leaders. So there has long been a concern that if Republicans take power back in the House, they could balk at raising the debt ceiling to pay the nation’s debts, and in the process, sabotage the economy under a Democratic president. Only compounding that anxiety has been the House Freedom Caucus’s “burn it down” ethos and the de facto head of the Republican party, Donald Trump, telling Kaitlan Collins at CNN’s recent town hall that “if they don’t give you massive cuts, you’re going to have to do a default.”
One can see how Trump might want to crash the Biden economy. Republican National Committee chair Ronna McDaniel suggested last week that the default could bode “very well for the Republican field,” and Trump is at the front of the pack. Of course, Trump has never shied away from chaos, which is what a default would be, as Justin Wolfers, a professor of economics and public policy at the University of Michigan, told NPR: “The financial system freezes up. That means there’s no more borrowing, businesses stop investing and the markets go absolutely haywire.” In 2011, just the possibility of default caused America to lose its AAA credit rating; could a default today push America into recession?
That threat subsided Wednesday night as the House voted 314-117 in favor of a bill negotiated by President Joe Biden and House Speaker Kevin McCarthy that would suspend the debt ceiling until early 2025. There remain some hurdles in the Senate, with Utah’s Mike Lee, for one, calling the deal a “fake response to burdensome debt.” But with both Majority Leader Chuck Schumer and Minority Leader Mitch McConnell on board, the bill is expected to clear the Senate in the coming days.
McCarthy is taking a victory lap for holding off his party’s far-right flank to get a deal through the House. The big winner, however, is Biden, who prevailed in a standoff that could have sunk the economy—and his reelection chances. While Republicans seemed to dominate the airwaves leading to Wednesday night’s vote, the often underestimated Biden and his White House team negotiated, arguably, the best possible deal under very difficult circumstances.
Biden had some options in recent months, but none of them were tested. Theoretically, he could’ve minted a trillion-dollar coin. But you’d have to get Treasury Secretary Janet Yellen on board, which appeared unlikely. “I’m opposed to it and I don’t think we should consider it seriously. It’s really a gimmick,” she told CNBC, adding: “It compromises the independence of the Fed, conflating monetary and fiscal policy.” There was talk about a discharge petition to bring a clean debt ceiling bill to the floor, but it would mean finding at least five sane Republican members of Congress who would risk a primary challenge by circumventing McCarthy. Then there was the untested theory that Biden could invoke the 14th Amendment, which Yellen believed could trigger a “constitutional crisis.” As she told ABC News, “There is no way to protect our financial system and our economy other than Congress doing its job and raising the debt ceiling and enabling us to pay our bills.”
So the Biden administration found itself without good options and needing desperately not to spook the markets. The White House had to prevent an economic meltdown while negotiating with economic terrorists. Enter the director of the US Office of Management and Budget Shalanda Young, who, along with counselor to the president Steve Ricchetti and other White House officials, brokered the deal with Republicans. McCarthy had privately praised Young as “well respected” and “well liked,” according to The Washington Post, while Republican senator Susan Collins told CNN, “She can cut through all of the, as Joe Biden would say, ‘malarkey,’ and get to the heart of the issue.”
McCarthy held a lot of good cards, but is not much of a policy wonk and, per The New York Times, is still “a golden retriever of a man.” He insisted new work requirements for federal assistance programs were a “red line,” and indeed, new ones will be imposed as part of the deal. But McCarthy’s “red line” ended up being a starting line for expanding SNAP. As Axios noted, “the number of people eligible for the Supplemental Nutrition Assistance Program (SNAP) will actually go up as a result of the agreement.” In the end, “the new SNAP work requirements do absolutely nothing when it comes to deficit reduction” but “do help veterans and the homeless.”
One big question emerging from this debt ceiling standoff is what does today’s Republican Party even stand for? Boehner and his successor, Paul Ryan, wanted to make the government smaller. But does Trump really want to do that? Trump says he doesn’t want to cut entitlement programs, yet he wants to cut taxes. This is not a recipe for financial solvency.
Trump, of course, was also fine with Congress lifting the debt ceiling three times while he was president without similar budgetary demands. When asked in last month’s CNN town hall about previously opposing using the debt ceiling in this manner, he responded, “Sure, that’s when I was president.” “So why is it different now that you’re out of office?” Collins asked, to which Trump replied: “Because now I’m not president.”
During this debt ceiling fight, likely due to pressure from Trump’s own agenda, McCarthy had to take cuts to Medicare and Social Security “completely off the table.” His party only seemingly stands united behind massive spending cuts when a Democratic president is in charge.
As could be expected, the deal had things for everyone to dislike. Republican representative Chip Roy called it a “betrayal” and led the right-wing revolt against it. Fellow Republican Nancy Mace tweeted that the party “got outsmarted by a President who can’t find his pants.” And part-time insurrectionist Congresswoman Marjorie Taylor Greene called the deal “a shit sandwich,” though she still voted for it.
Progressives are also unhappy with the deal, which is very much the kind of agreement a divided government produces. Progressive Caucus chair Pramila Jayapal, who voted “no,” said that although “We appreciate the President and White House negotiating on behalf of the people given the circumstances,” Congress “must be clear that this hostage-taking is absolutely unacceptable and that there will be very real consequences for working people and poor people.” She added, “while the Biden Administration was able to walk back many of the extreme GOP’s worst ideas, we should never have gotten to this place.”