Debt ceiling explained: Why it’s a struggle in Washington and how the impasse could end

Speaker of the House Kevin McCarthy of Calif., talks to reporters as Rep. Patrick McHenry, R-N.C., listens after meeting with President Joe Biden Monday at the White House. (AP Photo/Alex Brandon)

WASHINGTON — President Joe Biden and House Speaker Kevin McCarthy met Monday after a weekend of on again, off again negotiations over raising the nation’s debt ceiling and mere days before the government could reach a “hard deadline” and run out of cash to pay its bills.

The two sides are working to reach a budget compromise before June 1, when Treasury Secretary Janet Yellen has said the country could default.

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Speaking to reporters after Monday’s meeting, McCarthy said the two sides had not yet reached an agreement but the meeting was “productive.” In his own statement following the Oval Office sit-down, Biden echoed those sentiments.

McCarthy and Republicans are insisting on spending cuts in exchange for raising the debt limit. Biden has come to the negotiating table after balking for months but says the GOP lawmakers will have to back off their “extreme positions.”

On Sunday evening, negotiators met again and appeared to be narrowing on a 2024 budget year cap that could resolve the standoff.

What is the debt ceiling fight all about?

Once a routine act by Congress, the vote to raise the debt ceiling allows the Treasury Department to continue borrowing money to pay the nation’s already incurred bills.

The vote in more recent times has been used as a political leverage point.

House Republicans, newly empowered in the majority this Congress, are refusing to raise the debt limit unless Biden and the Democrats impose federal spending cuts and restrictions on future spending.

The Republicans say the nation’s debt, now at $31 trillion, is unsustainable. They also want to attach other priorities, including stiffer work requirements on recipients of government cash aid, food stamps and the Medicaid health care program. Many Democrats oppose those requirements.

Biden had insisted on approving the debt ceiling with no strings attached, saying the U.S. always pays its bills and defaulting on debt is non-negotiable.

Is it close to being resolved?

There are positive signs, though there have been rocky moments in the talks.

Start-stop negotiations were back on track late Sunday, and all sides appear to be racing toward a deal. Negotiators left the Capitol after 8 p.m. Sunday and said they would keep working.

But reaching an agreement is only part of the challenge. Any deal will also have to pass the House and Senate with significant bipartisan support. Many expect that buy-in from the White House and GOP leadership will be enough to muscle it over the finish line.

What are the hangups?

Republicans want to roll back spending to 2022 levels and cap future spending for the next decade.

Democrats aren’t willing to go that far to cut federal spending. The White House has instead proposed holding spending flat at the current 2023 levels.

There are also policy priorities under consideration, including steps that could help speed the construction and development of energy projects that both Republicans and some Democrats want.

Democrats have strenuously objected to a Republican push to impose stiffer work requirements on people who receive government aid.

Biden, though, has kept the door open to some discussion over work requirements.

What happens if they don’t raise the debt ceiling?

A government default would be unprecedented and devastating to the nation’s economy. Yellen and economic experts have said it could be “catastrophic.”

There isn’t really a blueprint for what would happen. But it would have far-reaching effects.

Yellen has said it would destroy jobs and businesses and leave millions of families who rely on federal government payments to “likely go unpaid,” including Social Security beneficiaries, veterans and military families.

More than 8 million people could lose their jobs, government officials estimate. The economy could nosedive into a recession.

Is there a backup plan if talks fail?

Some Democrats have proposed that they could raise the debt ceiling on their own, without help from Republicans.

Progressives have urged Biden to invoke a clause in the Constitution’s 14th Amendment that says the validity of the public debt in the United States “shall not be questioned.” Default, the argument goes, is therefore unconstitutional.

In Congress, meanwhile, House Democratic leader Hakeem Jeffries has launched a process that would “discharge” the issue to the House floor and force a vote on raising the debt limit.

It’s a cumbersome legislative procedure, but Jeffries urged House Democrats to sign on to the measure in hopes of gathering the majority needed to trigger a vote.

The challenge for Democrats is that they have only 213 members on their side — five short of the 218 needed for a majority.

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