Congress is on the verge of narrowly averting a catastrophic debt default — and some Democrats want it to be for the last time.
The calls for taking the near-annual fight out of lawmakers’ hands are coming from prominent voices such as House Budget Committee Chairman John Yarmuth (D-Ky.) and Treasury Secretary Janet Yellen, who want to eliminate the debt limit in its current form.
They argue that members of Congress should not be able to use the threat of a debt default as political leverage ever again — an approach that would respond to GOP stonewalling by playing some hardball of their own.
Although lawmakers are poised to stave off a national default barely a week before the Oct. 18 deadline, when the U.S. is projected to breach the debt ceiling, they’ll have to deal with it again in December when the latest short-term extension expires.
That’s leading some Democrats to propose longer-term solutions, like taking the authority away from Congress or exempting bills related to the debt limit from the Senate filibuster rules.
Yarmuth last week joined Rep. Brendan Boyle (D-Pa.) in introducing a bill that would transfer the authority to raise the debt limit from Congress to the Treasury secretary.
Speaker Nancy Pelosi (D-Calif.) called the proposal an “excellent idea,” although she stressed Democrats are focused on averting a default now and would leave a conversation about long-term solutions for later.
Boyle has also previously introduced legislation in recent years to repeal the debt limit altogether as a way to permanently eliminate a disastrous scenario that would lead to a U.S. credit downgrade, a likely recession and delayed Social Security, military salary and other essential payments made by the federal government.
He renewed his push this week after Republicans, led by Senate Minority Leader Mitch McConnell (Ky.), partly backed off their demands that Democrats use the more time-consuming and filibuster-exempt budget reconciliation process to raise the debt limit, ultimately agreeing to a short-term extension lasting into December.
“While I welcome this change in stance from Sen. McConnell, we need a long-term solution to our debt ceiling dysfunction. It’s time to end the debt limit as we know it,” Boyle said.
Rep. Don Beyer (D-Va.), the chairman of the Joint Economic Committee, also called to abolish the debt ceiling.
“A chaotic Senate vote 11 days before a deadline that could have wrecked our economy is no way to govern the most powerful nation on Earth,” Beyer tweeted. “It doesn’t have to be like this — Congress has the power to stop it, and we should.”
Yellen came out in support of getting rid of the debt limit in testimony last week before the House Financial Services Committee, arguing that it’s impractical to limit the Treasury’s ability to pay for spending already enacted by Congress and the president.
“When Congress legislates expenditures and puts in place tax policy that determines taxes, those are the crucial decisions Congress is making,” she said.
“And, if to finance those spending and tax decisions, it’s necessary to issue additional debt, I believe it’s very destructive to the president and myself, the Treasury secretary, in the situation where we might be unable to pay the bills that result from those past decisions.”
During a virtual roundtable with business leaders hosted by the White House on Wednesday, JPMorgan Chase CEO Jamie Dimon said, “we should get rid of the debt ceiling.”
“We don’t need to have this kind of brinkmanship every couple years,” Dimon said when President Biden asked for his thoughts about the need to raise the debt limit.
Biden, meanwhile, has yet to take a position on making reforms to the debt limit. When asked during a press briefing this week whether the president backs abolishing the debt limit, White House press secretary Jen Psaki said the administration is focused on the more imminent deadline to prevent a default.
“Right now, our focus is on raising the debt ceiling and the limited amount of time we have left to do that and do it without impacting the retirement savings accounts, the Social Security, and the economic security of millions of Americans. There’s plenty of time to have a conversation after that,” Psaki said.
The U.S. is one of the few countries in the world known for having a debt ceiling in the first place, and for its government repeatedly coming close to fiscal calamity over it.
Denmark is the only other major Western nation to have a debt limit. But its is far above its spending level and has never come close to a serious breach, according to the Council on Foreign Relations.
It’s not clear that Democrats would be entirely unified about overhauling the debt limit; some fiscally minded centrists are skittish about making major changes to precedent or appearing dismissive of the national debt.
House Democratic leaders had to tamp down some reluctance from some moderate members to vote for a stand-alone debt limit suspension into December 2022 last week. In exchange for their votes, Democratic leaders committed to holding a vote on a resolution backed by members of the Blue Dog Coalition that would require annual congressional hearings on the nation’s fiscal state to help inform proposals for how to reduce the national debt.
Republicans, on the other hand, have historically been divided over the debt limit and believe discussions about raising it should involve deficit reduction measures. Only 11 Senate Republicans were willing to join with Democrats on Thursday to overcome a procedural motion on the debt limit extension, underscoring the reluctance in the caucus to be seen as helping Democrats under the Biden administration on the issue.
But in recognition of the potential consequences of a default, Sen. Rick Scott (R-Fla.) recently introduced legislation that would require the Treasury to prioritize payments for seniors, veterans and the military in the event of a default.
Aside from removing authority over the debt limit from Congress, the other “nuclear option” for preventing future showdowns by making a filibuster carveout for bills related to it ran into resistance from key centrist Sen. Joe Manchin (D-W.Va.).
“I’ve been very, very clear where I stand on the filibuster. Nothing changes,” Manchin said.
Even so, other Democrats already frustrated with Senate Republicans’ ability to use the filibuster to block most of their agenda think it’s a better alternative than merely kicking the can down the road.
Following Senate passage of the debt limit extension late Thursday, the House will vote to send the bill to Biden on Tuesday evening.
But before that agreement came to fruition, the discussion of changing the filibuster, eliminating the debt limit and even fringe ideas like minting a trillion-dollar coin underscored the fear and frustration among Democrats that Republicans could force a showdown despite being in the minority.
“We are willing to take this offer in order to stave off fiscal ruin, but we are all beside ourselves that the only thing Republicans are willing to do is prevent disaster for three months and put us right back in this position,” said Sen. Chris Murphy (D-Conn.).
“I think changing the filibuster rules is a much better path than this. But, you know, it’s no secret that it was gonna be hard to get consensus on that in such a short period of time,” he said.