It’s not just Democrats who are wary of House Republicans potentially holding the U.S. economy hostage next year with another debt limit showdown. Wall Street and corporate America are concerned, too.
Recently, prominent business types have urged lawmakers to deal with the issue during the current post-election “lame duck” session, even if that means via legislation that could be passed with only Democratic votes.
With that avenue all but impossible this close to Congress wrapping up, Democrats next year may regret having prioritized other items in the lame duck’s waning days.
Republicans in both chambers of Congress have been eyeing possible demands for raising the debt ceiling and not letting the United States government default for the first time ever. Were that to happen, the dollar could lose its status as the world’s reserve currency, a role that lowers American interest rates and makes U.S. debt sought after in times of crisis, like the financial collapse of 2008.
Sen. John Thune (R-S.D.) told The Washington Post that he and other Republicans would like to see changes in big-ticket programs like Social Security or Medicare in return for approving a debt limit hike.
“Can the debt limit present that opportunity? I think it can, but we’ll see,” he said.
Prominent corporate leaders are not comfortable with this emerging game of chicken.
Jamie Dimon, the CEO of JPMorgan Chase, said on CBS’ “Face the Nation” Sunday that the effects of a first-ever debt default because of the debt limit impasse would be “potentially catastrophic.”
“I would never take that risk,” he said. “For me, yes, I would get it done now. Take it off the table.”
“For me, yes, I would get it done now. Take it off the table.”
Earlier this month, in an interview with CNBC, General Motors CEO Mary Barra called on lawmakers to address the debt ceiling in the lame duck, and to deal with immigration and tax breaks for business investment. “Going forward, we’d like to see the debt ceiling resolved,” among other priorities, Barra said.
And Josh Bolten, a White House chief of staff in the George W. Bush administration and CEO of the Business Roundtable, a powerful business lobbying group, also called for dealing with the issue sooner rather than later.
“Given the uncertainty facing the economy, we also urge Congress to address the debt ceiling as soon as possible,” Bolten said in a statement accompanying the group’s most recent quarterly survey of business leaders.
It’s unclear when the debt limit will need to be raised, but it will probably be before next autumn. There was some momentum, after the Democrats’ better-than-expected showing in the midterms, to try to raise the debt limit or potentially address it with only Democratic votes by using the congressional budget process.
But that faded as attention turned to avoiding a government funding lapse and subsequent shutdown, compounded by apparent skittishness among Senate Democrats. And Senate Minority Leader Mitch McConnell’s declaration that he expects the Senate won’t stay in session past Dec. 22 means there won’t be enough time to try the Democrats-only approach.
So now the party is setting up a fight in 2023, when it won’t be able to use the budget process to pass an increase on a party-line basis because the House will be in GOP hands.
House Budget Chairman John Yarmuth (D-Ky.) warned on MSNBC that Democrats will ultimately regret not taking action now.
“I think if we don’t, it’s like handing the Republicans a legislative nuclear weapon,” he said. “They’ve already made it clear what they’re going to do. They’re going to use it to extort cuts in programs.”
“I think if we don’t, it’s like handing the Republicans a legislative nuclear weapon.”
Yarmuth said the limit has been raised 78 times since 1960, evidence that it has had no effect on limiting the growth of government debt, as Republicans claim.
If Democrats believe that having the business world on their side will help convince Republicans not to take their gambit too far in 2023, they may be mistaken. The last big standoff in 2011 brought the U.S. Treasury within a handful of days of default, and the House Republican conference now is different from what it was then.
“Instinctually pugilistic, prone to brinkmanship, and harder to corral” was how Liam Donovan, a principal with the lobbying firm Bracewell LLP, described the incoming class of House Republicans. “And with [former President Donald] Trump himself using the debt limit as a favorite sign of establishment fecklessness, this dynamic will only be magnified.”
The Republicans’ narrow five-seat margin over Democrats in the House means party leaders will be under intense scrutiny when the issue comes to a head, as “one false step” could lead to their ouster, Donovan said.
“But the real risk is that too often, Wall Street thinks this is all Capitol Hill kayfabe, and doesn’t react to the sort of legislative chicken that really should make them nervous,” he said.
In turn, Donovan said, this gives lawmakers a false sense of security, even as potential default draws nearer. “Absent some acute pain being felt in the markets or a selfless act from leadership, I don’t know how you’ll see the next showdown resolve.”