A look at America’s debt ceiling standoff
Images: Kiyoshi Ota/AP | Nathan Howard/Reuters
President Biden and House Speaker Kevin McCarthy (R-CA) will meet later today to discuss a deal to raise the federal debt ceiling, in the latest effort to avoid an impending default on government debt.
Quick reminder: the federal debt ceiling is the amount of money the US is legally authorized to borrow to meet its existing obligations; it can only be raised by an act of Congress.
🤔 What happens once the ceiling is reached?... If the US fails to make interest payments to bondholders, then the federal government would be in default for the first time ever. This would lower America’s credit rating, increase the cost of the national debt, and potentially set off a global economic crisis.
- Moody’s Analytics estimates that even a temporary US default – aka one week or less – would result in ~1 million jobs lost over the next year, in addition to a mild stock market recession in the second half of 2023.
🏛️🗣️ How are negotiations going?... Despite weeks of talks, lawmakers still remain far apart on an overall agreement.
- Republicans are insisting that any bill to raise the debt ceiling also includes legislation that would reduce 2024 federal spending compared to this year, increase work requirements for social safety net programs, overhaul the federal permitting system for energy projects, and clawback all unspent Covid aid money (estimated at ~$60 billion).
- Democrats ideally want the debt ceiling raised without any caveats, but have indicated a willingness to compromise in certain areas. Their counteroffers have included commitments to cap 2024 spending at this year’s levels, claw back some Covid-related funds, and increase work requirements for most financial aid programs (excluding Medicaid).
👀 Looking ahead… Treasury Secretary Janet Yellen reiterated yesterday that the US could default on its debt as early as June 1, with the odds of a default reaching near-certainty by June 15.
đź“Š Flash poll: Overall, which side do you agree with more in the ongoing debt ceiling negotiations?
See a 360° view of what media pundits are saying →
Sprinkles from the Left
- Some commentators argue that President Biden and Democrats shouldn’t have been caught off guard by House Republicans’ attempt to hold the debt ceiling hostage in order to extract spending cuts, and should cave as little as possible to get a deal done.
- Others contend that the GOP’s desire to strengthen work requirements for welfare programs is a solution in search of a problem, with the historically low levels of unemployment currently in America.
- “How Biden Blew It on the Debt Ceiling” –Paul Krugman, NY Times
- “The GOP’s Work-Requirement Scam“ –Eric Levitz, NY Magazine
- “Why is the climate on the table in the debt ceiling fight?” –Jackie Calmes, LA Times
Sprinkles from the Right
- Some commentators argue that expanding work requirements for federal welfare programs is supported by a majority of the American public, and will win House Republicans some points with many centrists who agree on the topic.
- Others contend that Congress needs to take back unused Covid relief funds if they’re not being spent on fighting the virus, and should also work to claw back money spent on PPP fraud.
- “The GOP Can Win on Work Requirements and Welfare” –WSJ Editorial Board
- “In debt ceiling talks, Biden and Congress must address PPP fraud” –David Walker, Washington Examiner
- “Is President Biden About to Triangulate Democrats on Welfare Work Requirements?” –Matt Weidinger, American Enterprise Institute
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