As debt ceiling fight rages, Democrats bring up an old idea: Abolish it

Now, the crisis that Schatz and other Democratic lawmakers have long labored to prevent has the country 14 days away from running out of money to pay its bills. The potential for doomsday has affirmed for some Democrats the point they’ve been straining to make: The debt ceiling simply shouldn’t exist in the first place.

“I just always thought this was the stupidest thing we do, and we do a fair number of stupid things,” Schatz said this week.

Time and again, Democrats have tried to repeal or rethink the debt ceiling — the legal maximum that the U.S. government may borrow to pay for spending it has already approved — and each time, they’ve encountered steep resistance. Even President Biden previously has rejected the idea, telling reporters last year it would be “irresponsible” to eliminate the cap fully.

In the aftermath of the 2022 election, some Democrats eyed another approach: They tried to use their control of Congress at the time to raise the cap high enough that the debate would not come up once the GOP assumed control of the House in January. But Democrats could not find the time and support to act, opening the door for Republicans now to use the debate as an avenue to push for massive spending cuts.

The all-too-familiar battle has inspired some Democrats to push anew for a repeal. Even as they acknowledge they don’t have the votes, they agree it’s time for Congress to learn a lesson that has eluded it for decades.

“Any time the debt ceiling issue arises … there will be a lot of attention and a lot of talk about it. People will say, ‘Yes, we need to reform it,’” said Rep. Brendan Boyle of Pennsylvania, the top Democrat on the House Budget Committee. “But the moment the debt ceiling is raised … people immediately forget it and move on to the next big thing.”

“That is a mistake,” Boyle continued, “and we have to resist that instinct this time.”

For now, Democrats and Republicans are racing to resolve a political emergency. Two tense meetings of Biden, House Speaker Kevin McCarthy (R-Calif.) and other congressional leaders have concluded only with a promise to keep talking — and an announcement Tuesday that they had appointed new emissaries to devise a compromise. The government already has reached the current debt limit of about $31.4 trillion, but it has relied on special, temporary accounting maneuvers to delay the need to borrow more.

On Thursday, McCarthy told reporters that negotiations were proceeding and that he hoped to have a vote next week in the House on an agreement. Senate Majority Leader Charles E. Schumer (D-N.Y.) said the Senate would leave town for a planned recess but stood ready to return on short notice to take up legislation.

Later in the afternoon, though, the far-right House Freedom Caucus declared that “there should be no further discussion” until the Senate passes the bill the House passed last month that would raise the debt ceiling and sharply cut spending.

For weeks, McCarthy has held firm in trying to leverage the debt ceiling to advance the GOP’s agenda, including new work requirements for the recipients of Medicaid, food stamps and other federal aid programs. Biden, however, has swiped at Republicans for taking the country’s credit “hostage,” arguing that Congress should raise the debt ceiling without conditions or delay.

In the meantime, the clock has kept ticking, and the deadline — known in Washington as the “X-date” — could arrive as soon as June 1, according to the Treasury Department, which issued its latest urgent warning Monday. A failure to act could cause the first-ever federal default, a fiscal calamity that might unleash untold hardship — potentially shuttering key government programs, delaying Social Security checks, decimating the stock market, and leaving millions of Americans unexpectedly out of a job.

On Thursday morning, the Bipartisan Policy Center reported that the government on June 1 is due to send out $47 billion in Medicare payments, $12 billion in veterans’ benefits and $10 billion in military pay and retirement, among other payments — all imperiled if the Treasury really does run out of cash and other options by then.

Yet any resolution to the current stalemate is likely to be short-lived.

Privately, White House officials have sought at least a two-year increase, which would extend borrowing until after the 2024 presidential election, according to two people familiar with the matter who spoke on the condition of anonymity to describe the sensitive talks. But the bill the House passed last month would lift the debt limit by $1.5 trillion, or until the end of next March, whichever arrives first. McCarthy has touted a tighter time frame as a political benefit for his party, offering conservatives an opportunity to seek a second round of spending cuts next spring, the two sources said.

The prospect of another debt ceiling debacle — even before the current one has concluded — has offered little comfort to Democrats in recent days. Some have tried, after all, to eliminate the threshold entirely, only to falter repeatedly in a Capitol that rarely acts unless it is confronted with the prospect of catastrophe.

Boyle, the Pennsylvania Democrat, formally embarked on his campaign to eliminate the debt ceiling in 2017, introducing legislation then with a single line of text: “Sections 3101 and 3101A of title 31, United States Code, are hereby repealed.” That year, conservatives had balked at raising the borrowing cap in a rare split with President Donald Trump, who instead had to work out a deal with Democrats to stave off a default. (This month, Trump reversed course, saying Republicans should “do a default” to advance their agenda since he is no longer president. He previously expressed an openness to ending the debt ceiling, too.)

The repeal put forward by Schatz — supported by other Senate Democrats, and led by Rep. Bill Foster (D-Ill.) in the House — aims to accomplish essentially the same goal. Party lawmakers first introduced the bill under Trump and continued proposing versions of it under Biden, when Republicans in 2021 repeatedly blocked debt ceiling increases until they could attempt to unwind Biden’s economic agenda.

Other recent efforts have tried to address the debt ceiling as part of a broader overhaul of the budget process. A 2019 bill from Sen. Sheldon Whitehouse (D-R.I.), which at the time had bipartisan support, also would have paved the way for new deficit reduction tied to an increase in federal borrowing. Two years later, Rep. Jodey Arrington (R-Tex.), now the chairman of the House Budget Committee, co-sponsored a plan with Rep. Scott Peters (D-Calif.) to rethink the way the debt ceiling is raised.

But where such bills differed in language or scope, they still all shared the same political fate: They never went anywhere.

“Nobody really paid a lot of attention to it, to be honest with you,” said Rep. Richard E. Neal of Massachusetts, the top Democrat on the tax-focused House Ways and Means Committee. He said the “demagoguery” of past fights “quickly fell by the wayside, and people forgot about it. And then all of a sudden it became a tool of almost extortion.”

The United States is one of only two modern democracies that still mandate an absolute debt ceiling. The other is Denmark, which has set its borrowing cap so high that it cannot really breach it, sparing it from perennial crises.

Paradoxically, though, the United States created the World War I-era system as a way of making it “easier, not harder,” for the government to borrow money, according to Maya MacGuineas, the president of the Committee for a Responsible Federal Budget. The cap spared the Treasury Department from having to obtain congressional permission every time it issued bonds or otherwise borrowed, so long as policymakers stayed below the limit.

More recently, the limit has functioned like a forcing mechanism, as “one of the only fiscal speed bumps that exist” to push the country’s spending to the political foreground, added MacGuineas, whose organization advocates for deficit reduction. She called this week for rethinking the threshold, rather than repealing it, as a way of nudging Congress to analyze more regularly and systematically the tax dollars it spends and receives.

At a news conference Wednesday, dozens of House and Senate Republicans mounted a defense of their latest brinkmanship, as McCarthy said lawmakers should not raise the limit until they could reassess the government’s fiscal condition. He repeatedly chided Democrats for taking too long before they “backed off the insane, unrational, unsensible idea that you just raise the debt ceiling.”

Sen. Chris Van Hollen (D-Md.) has seen plenty of these showdowns over more than two decades in Congress, prompting him to join Schatz and other Democrats on legislation that would repeal the limit outright. Asked why such a bill had never passed, he described it as “simple political math,” adding in an interview this week: “We don’t have enough votes to get rid of the debt ceiling requirement. If we did, we would have defused this economic weapon a while ago.”

It was fairly early in Van Hollen’s career — as a member of the Democratic minority in the House in 2011 — that Republicans took the nation closest to the fiscal brink. The GOP’s ascendant conservative wing, known then as the tea party, seized on the debt ceiling to demand stark spending cuts from President Barack Obama, touching off a stalemate that rattled the stock market and prompted a costly downgrade in U.S. credit.

This year, Van Hollen said he would “believe it when I see it” on lawmakers’ ability to reach a deal that averts a default. And he exuded a similar sense of skepticism that Congress would pivot later to preventing another fiscal crisis.

“Hopefully, we don’t have to experience a disaster in order for people to defuse this political weapon,” he said.

Politically, Democrats have acknowledged such a vote would be hard, even for their own members. It could open the door for campaign-season attacks claiming they raised the national debt — even though the borrowing cap covers spending that the two parties have previously approved.

“I get a lot of quiet ‘attaboys,’” said Schatz, acknowledging the same political considerations. “A lot of people want this to happen but are worried about how it would look, or how difficult it would be to explain. I give the American people a lot more credit than that.”

Not even Biden has expressed much favor in repealing the debt ceiling, putting him at odds last year with his own Treasury Department. At the time, Treasury Secretary Janet L. Yellen had been pleading with lawmakers to take more permanent action, a message she delivered yet again this week as talks in Washington lumbered along.

“Personally, I think we should find a different system for deciding on fiscal policy,” she told reporters in Japan.

The White House did not respond to a request for comment.

As the United States once again brushes uncomfortably close to the deadline, some Democrats have echoed those calls for a more lasting solution. At a private dinner last week for House Democrats, Boyle said he delivered his latest “passionate plea,” urging lawmakers to fix this problem once and for all.

“If we get through this and avoid default, and there is not a permanent fix to the debt ceiling … we can’t just carry on like normal,” the congressman said, before offering an ominous note about the fight to come. “We will be right back in this same situation again.”