Paying the Ransom

In 2011, the last time the country faced a debt-ceiling showdown, Republican lawmakers took away an important lesson: economic extortion and political brinkmanship are good politics. By threatening to tank the U.S. economy, Republicans forced President Obama to make significant cuts to federal spending. “What we did learn is this,” then Senate Majority Leader Mitch McConnell said at the time. “[The economy’s] a hostage that’s worth ransoming.”

Today, as we face another debt-ceiling crisis, the GOP is at it again. Emboldened by the Congressional Freedom Caucus, Majority Leader Kevin McCarthy is trying to extract major concessions from President Biden. To raise the $31.4 trillion debt ceiling, Republicans are demanding caps on federal spending, work requirements for anti-poverty assistance programs, including SNAP and TANF, and cuts to federal programs, including a recently approved round of funding for the IRS meant to crack down on high-income tax evaders; those uncollected revenues will likely increase the deficit by nearly $500 billion over the next ten years. (McCarthy’s push to make the Trump-era tax cut permanent would similarly increase the deficit by an additional $3.5 trillion over that same period.) If these demands aren’t met, McCarthy and his caucus say they will let the country default, which would precipitate economic and financial catastrophe. It would disrupt financial markets around the world and effectively shut down the U.S. government. Monthly Social Security payments, which benefit about 70 million people—or one in five Americans—would stop. An estimated 8 million people could lose their jobs. Retirement accounts would be devastated, and the economy, still recovering from the pandemic, would fall into recession.

By now, no one should be surprised by the actions of the Republican Party. They are proving once again that they are deeply unserious actors manufacturing a very serious crisis for their own political gain. More surprising is the response from President Biden, who seems to have learned the wrong lessons from 2011. Rather than taking on the GOP’s recklessness, he’s rewarding it, just as Obama did more than a decade ago. The results have been alarmingly predictable.

Before Biden started negotiating with McCarthy, something he insisted he wouldn’t do, he had other options, some admittedly more viable than others. He and Democratic leadership could have tried to neutralize the debt limit by raising it when they controlled Congress and the White House. While this is no longer possible, Biden and Congressional Democrats could still try to force a “clean” up-and-down House vote for raising the debt ceiling, which Republicans did three times during the Trump Administration without restrictions. Some Senate Democrats, led by Bernie Sanders and Elizabeth Warren, and members of the Congressional Progressive Caucus have urged the president to invoke Section 4 of the Fourteenth Amendment, which states that “the validity of the public debt of the United States...shall not be questioned.”

Instead, Biden is reportedly willing to accept a new round of work requirements, spending caps, and not-inconsequential cuts to programs designed for the country’s most vulnerable populations—perhaps the least surprising development in this premeditated game of brinkmanship. This is a price he is willing to pay to keep the economy running, which seems to be another lesson the president has taken from 2011. Despite capitulating to Republicans during the last debt-ceiling standoff, Obama won reelection. Biden appears to believe that paying the ransom still comes at a low enough political cost that taking on the GOP’s recklessness isn’t worth the fight.