WASHINGTON - Senate Republicans on Wednesday threatened to vote against an increase to the debt ceiling unless Congress first agrees to new spending cuts or other reforms, raising the potential for a major political showdown that could carry vast implications for both the global economy as well as President Joe Biden's agenda.
The new ultimatum marked a reversal for Republicans, who agreed to address the ceiling - the statutory amount the government can borrow to pay its bills - multiple times to advance policies under now-former President Donald Trump that helped add $7 trillion to the federal deficit during his term.
"We had a pandemic that drove a lot of [spending], but what's been added on top of it, and what [Democrats] plan to spend moving forward on top of that, I think it calls for some level of sanity," said Florida GOP Sen. Marco Rubio.
"Generally, the debt limit is not very good leverage for that," he continued. "But at this point, I mean, there really is no other way to make people here wake up and live in the real world."
The renewed Republican threats arrived only 10 days before a current agreement that suspends the debt ceiling is set to expire. If Congress cannot reach a deal to raise or suspend the debt ceiling by month's end, the U.S. government has only a few weeks to sustain itself using "extraordinary measures," as it is known - though the Treasury Department has not provided an exact date when its spending would be at risk.
The drama intensified earlier Wednesday, after Senate Minority Leader Mitch McConnell told Punchbowl News that his party is unlikely to vote for an increase, putting pressure on Democrats to tackle it alone as part of a roughly $3.5 trillion budget deal that they plan to pass through a process known as reconciliation. The move allows Democrats to advance spending priorities using 51 votes, rather than the normal 60, provided the entire party sticks together.
Democrats, however, have signaled they are disinclined to take that route. The mere prospect that it could fall on them to solve left some party lawmakers seething, particularly after they joined Republicans to raise and suspend the debt ceiling under Trump out of a belief that the issue is too dire to politicize.
"This is once again the McConnell double standard," said an incensed Sen. Ron Wyden, D-Ore., the leader of the chamber's Finance Committee, as he exited a meeting Wednesday with Senate Majority Leader Chuck Schumer.
"When Donald Trump was president, they made sure everything happened," Wyden added. "Now we have covid debt, we have Trump debt, we've got a double standard. And we want to make it clear, nobody is going to hold the American economy hostage."
The White House did not respond to a request for comment. The Treasury Department also did not immediately respond to a request.
The U.S. government spends much more money than it brings in through tax revenue, and that annual gap is known as the deficit. In 2020, the U.S. government is expected to spend $5.8 trillion and bring in $3.5 trillion in revenue, leaving a deficit of $2.3 trillion, according to the Congressional Budget Office.
In order to finance the gap between spending and revenue, the Treasury Department borrows money by issuing debt. But the government can only issue debt up to the limit set by Congress, which is why the debt limit has to be raised or suspended periodically. The government currently has more than $28 trillion in debt subject to the limit, and it is expected to pay $300 billion in interest on this debt in 2021, according to CBO.
The Republicans' move Wednesday immediately invoked the specter of 2011, when party lawmakers similarly embarked on a game of brinksmanship over the debt limit under then-President Barack Obama. The high-stakes move nearly pushed the nation to default, a doomsday scenario in the eyes of economists that could wreak havoc globally if the U.S. is essentially unable or unwilling to pay its bills.
Much as now, Republicans a decade ago demanded spending cuts in exchange for an increase, resulting in a standoff during the Obama administration that spooked markets worldwide. While the GOP ultimately hammered out an agreement with the White House, it still resulted in massive reductions in domestic programs Democrats say hollowed out key federal health, science and education agencies - holes they are now trying to fill under Biden.
The new Republican threat came on a day when the Senate forged ahead with its plans to consider a roughly $1 trillion package to improve the nation's roads, bridges, pipes, ports and internet connections. The infrastructure package, which Democrats and Republicans have negotiated for months, is part of Biden's broader, roughly $4 trillion agenda, which Democrats hope to advance in the coming weeks.
Lawmakers from both parties say their infrastructure proposal is financed in full, and Democrats stress a second, roughly $3.5 trillion budget deal they are seeking through reconciliation similarly will be paid for - largely through tax increases on wealthy Americans and corporations. Both endeavors still have infuriated some Republicans, who have criticized their price tags and vehemently opposed tax increases to pay for new federal programs. McConnell on Wednesday took to the Senate floor to lambaste some of the new spending, stressing that tax increases to pay for it would "crush out country."
The criticisms have set the stage for other Republicans to seek cuts or other reforms specifically timed to the debt ceiling. They began issuing their demands this spring, after Democrats adopted a roughly $1.9 trillion coronavirus relief package. Senate GOP leaders even included in their party's official yet non-binding rules a pledge that they would oppose a debt ceiling increase unless Congress slashed spending or made other structural reforms.
"It's always been our position that without structural reforms in our finances that just raising the debt ceiling is not a responsible action," said Sen. John Cornyn, R-Texas, on Wednesday. While he declined to say if he would vote against an increase in the debt ceiling, Cornyn said Democrats needed to address "long-term insolvency of things like our entitlement programs."
Behind the scenes, GOP lawmakers have started to rally support for those efforts. Sen. Lindsey Graham, R-S.C., for example, circulated a letter among his colleagues last week putting forward a few ideas - including legislation that would set up panels to study the solvency of Social Security and Medicare along with other possible avenues for cuts to spending.
Wyden, however, strongly rebuked the idea with what he described as a basketball analogy - calling it "stall ball to essentially hold the economy hostage." He said lawmakers prefer to address this through regular order, suggesting Democrats may not be willing to add it to their reconciliation package, a move that would potentially open them to political criticisms on the campaign trail for adding to the debt.
Sen. Bernie Sanders, I-Vt., the leader of the Budget Committee, similarly blasted McConnell for what he described as hypocrisy. As he shepherds that reconciliation package to passage, he said Wednesday they are "looking at various approaches."
"There is no compromise here. We don't compromise with America paying its bills," said Sen. Elizabeth Warren, D-Mass., earlier in the day. "The Republicans are trying to extract something, and say that their leverage is having the United States default on its legal obligations, which is fundamentally wrong."
"Democrats went along during the Trump administration and we signed onto raising the debt limit three different times," Warren added. "We didn't try to negotiate for something, we didn't ask for something special."