Oct 24, 2022 - Politics & Policy

Scoop: Biden officials discussing lame-duck debt ceiling deal

Illustration of the Capitol building open with money coming out.

Illustration: Aïda Amer/Axios

The Biden administration is in early, quiet discussions with key Senate offices about raising the debt ceiling in the lame-duck session of Congress, Axios has learned.

Why it matters: The preliminary conversations reveal two political near-certainties gripping Washington: Republicans are likely to win control of the House, and a potential Speaker Kevin McCarthy would use the debt ceiling to extract painful spending cuts from the White House — even if it threatens to crash the economy.

State of play: Democrats, as well as Wall Street moderates, are alarmed by McCarthy’s rhetoric and are strategizing how they can deprive him of the blunt battle axe — a default on the nation's debt — that he appears willing to brandish.

  • Senate Majority Leader Chuck Schumer (D-N.Y.) will likely need 60 votes in the Senate to raise the debt limit above its current $31.4 trillion, requiring help from at least 10 of the 14 GOP senators who supported the last debt ceiling increase in December 2021.
  • One of those Republican senators, Susan Collins (R-Maine), is supportive of raising the debt limit in the lame duck this year, according to a person familiar with her thinking.

Driving the news: There's some existing — and now public — appetite among Senate Democrats to handle the debt ceiling in the lame duck as one of their last acts before a potential two years in the minority.

  • Sen. Jeanne Shaheen (D-N.H.) said Monday that she "absolutely" supports raising the debt ceiling in the lame duck or abolishing it entirely, according to Politico.
  • "It's ridiculous that this has become a partisan issue based on who happens to be in the White House," Shaheen said. "I'd say it gets raised automatically."
  • The White House disputes that any such conversation with congressional leaders has taken place.
  • “No one working for the Biden administration has had such a conversation,” said White House spokesman Andrew Bates.
  • "The President looks forward to working with a Democratic House and Senate,” he said. "He is focused on doing all they can to capitalize on how much Republicans are showing how much they’d devastate the finances of middle-class families, including with their continued threat to hold the American economy hostage in order to cut Medicare and Social Security."

The big picture: President Biden has ramped up his warnings in recent days about the consequences of failing to raise the debt limit.

  • "There’s nothing — nothing — that will create more chaos, more inflation, more damage to the American economy than this," Biden said at a Democratic National Committee event Monday.
  • On Friday, Biden ruled out supporting legislation that would outright eliminate the debt ceiling.
  • But Biden is moving closer to the position that President Obama ultimately took with House Republicans on the debt ceiling: refusing to negotiate.
  • "Let me be really clear: I will not yield," Biden said last Friday at the White House. "I will not cut Medicare, no matter how hard they work at it."

The intrigue: Some Democrats are floating the idea of practically repealing the debt ceiling by raising it beyond anyone’s expectations.

  • Jason Furman, a former chair of the Council of Economic Advisers for President Obama and a veteran of the 2011 and 2013 debt showdowns, called on Twitter for Democrats to raise it by $100 quintillion (which would be 20 zeros.)

Go deeper: Raising the debt ceiling in a lame duck would face numerous hurdles and would compete with other must-pass priorities — like funding the government — in a crowded and compressed calendar.

  • Any year-end deal would also depend on House Democrats solving a potential problem for McCarthy as one of their last acts in the majority, if they lose the election.
  • At the same time, they would be sparing their president a major political headache while also protecting an already fragile economy from an exogenous shock.

Be smart: "The historical record here doesn’t show Congress getting ahead of problems," said John Gimigliano, head of legislative affairs at KPMG. "Historically, we would expect them to deal with this when they have to. We have to see how the election goes."

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