GOP sees debt ceiling as its leverage against Biden

Senate Republicans plan to demand big spending reforms in exchange for their support of legislation to raise the nation’s debt ceiling, seeking leverage to rein in President Biden’s plan to pump trillions of dollars into the economy.

GOP senators are reviving demands they made in 2011, the last time there was a political standoff over raising the debt limit, but it’s a risky move.

The 2011 debt limit was solved at the last moment, and a subsequent downgrading of the nation’s creditworthiness by S&P triggered a stock market crash.

The issue is coming to a head, as Treasury Secretary Janet Yellen warned Friday that the debt limit will likely have to be raised by the end of September and urged Congress to do so under regular order, which means finding at least 10 Republican votes to support it in the Senate.

If Republicans can get spending reforms attached to the debt limit increase, they want to force Democrats to jam debt limit legislation in a budget reconciliation bill that is expected to pass without any GOP support. They don’t want to vote for anything that could give them some shared responsibility for the nation’s $29 trillion debt.

But Democrats, who are falling behind schedule on their two-track strategy for passing infrastructure legislation, will have a hard time wrapping up work on a reconciliation package by October.

Republican senators are calling for major spending reductions over the next 10 years in exchange for raising the federal government’s borrowing authority. They’re also pushing for the establishment of special commissions to curb the long-term growth of Social Security and Medicare.

“I’m all for spending caps, especially on nondefense domestic discretionary spending,” said Senate Republican Whip John Thune (S.D.) when asked about legislation to raise the debt limit.

“If they had a realistic way of getting a BCA-type approach to it, that would be great,” he said, referring to the Budget Control Act, which Congress passed in 2011 after a bitter fight over the debt limit.

That deal from 10 years ago established discretionary spending limits over a 10-year period as well as automatic across-the-board spending reductions of certain spending programs.

“A lot of our guys would like to see the government shutdown [legislation] attached. There’s the Romney Trust bill, which creates a commission to do entitlement reform. There are a number of budget reforms that our members I think would be supportive in the context of a vote on the debt limit,” Thune added.

He was referring to legislation sponsored by Sen. Rob Portman (R-Ohio) and other Republicans that would prevent future government shutdowns by creating an automatic continuing resolution to keep federal departments and agencies operating if Congress can’t agree on spending bills.

The Trust Act, sponsored by Sen. Mitt Romney (R-Utah) and co-sponsored by Democratic moderates including Sens. Joe Manchin (D-W.Va.), Kyrsten Sinema (D-Ariz.) and Mark Warner (D-Va.), would establish “rescue committees” to curb future spending on Social Security, Medicare and the Highway Trust Fund.

Sen. Lindsey Graham (S.C.), the ranking Republican on the Senate Budget Committee, plans to lay out the Senate GOP demands for fiscal reform in more detail this coming week.

The Republican calls for attaching spending reforms to the debt limit are already running into strong opposition from Democrats.

“Republicans never miss an opportunity to try and cut Social Security. I won’t have it,” Sen. Sherrod Brown (D-Ohio), an advocate for expanding Social Security, told The Hill Friday.

On Tuesday, Senate Minority Leader Mitch McConnell (R-Ky.) threatened that Republicans will block any stand-alone proposal to raise the debt limit, prompting condemnations from Democrats.

Senate Majority Leader Charles Schumer (D-N.Y.) called McConnell’s comments “shameless, cynical and totally political” and noted Democrats voted three times during the Trump administration to “do the responsible thing” and raise the debt limit without strings attached.

A senior Democratic aide on Friday pointed out the political environment this year is much different from 2011, when Republicans last tried to bargain over the debt limit. Ten years ago, the GOP had just captured control of the House in the previous year’s midterm elections and had some political mandate to demand reforms.

“Get the f— out of here. Democrats have unified control of the town and you want to put in a cut [to the] Social Security Commission? Get out of here,” the aide fumed.

Republicans think Democrats have a political motive behind pressuring Republicans to support a debt limit increase: shifting some of the responsibility for the nation’s record debt onto the GOP before the midterm elections.

“They would like anything to get Republican fingerprints on all these crazy policies that they’re proposing, and I don’t know why any Republican would want that to allow that to happen,” said Thune.

“The debt limit in the past has been carried on reconciliation,” he added.

Republican members of the House Budget Committee wrote a letter to congressional leaders of both parties on Wednesday laying out their own proposals to cut spending as part of any agreement to raise the debt limit.

Like Thune, they are proposing the establishment of discretionary spending limits modeled on the 2011 Budget Control Act. They are also floating the establishment of debt-to-GDP targets for federal spending and stronger enforcement of current budget rules.

Republicans acknowledge they have limited ability to stop Biden’s plan to pass a $3.5 trillion mostly social spending package through Congress later this year under the budget reconciliation process, which would allow Democrats to pass a “human infrastructure” bill through the Senate with a simple majority vote.

Instead, they see their leverage over the debt ceiling as a better opportunity to rein in some of Biden’s spending agenda.

Schumer and Senate Budget Committee Chairman Bernie Sanders (I-Vt.) haven’t made a final decision over how to advance legislation to raise the debt ceiling.

Democratic sources familiar with negotiations on the budget resolution, however, said there’s been little to no talk about including in it a reconciliation instruction addressing the debt limit.

One Democratic aide said Schumer appears to be leaning toward moving debt-ceiling legislation through regular order, which means it would need 60 votes — and the support of at least 10 Republicans — to advance on the Senate floor.

One major reason to move debt limit legislation on the Senate floor under regular order and apart from the reconciliation package is that it may need to be done before Democrats can finish negotiations on their sprawling $3.5 trillion human infrastructure plan.

Yellen sent a letter to congressional leaders on Friday warning that the federal government may not be able to pay its debt obligations beyond September unless lawmakers raise its borrowing authority.

The debt limit technically expires at the end of July, but Treasury officials can buy some more time by employing “extraordinary measures” to keep paying the government’s bills and avoid a default on U.S. debt.

“On Oct. 1 alone, cash and extraordinary measures are expected to decrease by about $150 billion due to large mandatory payments, including a Department of Defense-related retirement and health care investment,” Yellen wrote in a letter addressed to Speaker Nancy Pelosi (D-Calif.) and other leaders.

Yellen called on Congress to move debt limit legislation under regular order instead of attaching it to a reconciliation package, which could wind up delaying it as Democrats haggle over the final shape of their second infrastructure plan.

“In recent years Congress has addressed the debt limit through regular order, with broad bipartisan support,” she noted. “I respectfully urge Congress to protect the full faith and credit of the United States by acting as soon as possible.”