Debt Ceiling Debate Shaping Up to Be Central Focus of Congress This Spring, Summer
The House and Senate are in session this week. The House will vote on a senate-passed bill directing the administration to declassify all information related to the origins of COVID, a resolution removing U.S. troops from Syria and a bill overturning the Biden Administration’s Waters of the United States (WOTUS) rule. It is a busy floor schedule, but the main focus will be on the long-running process of raising the debt ceiling.
On January 13th, Treasury Secretary Janet Yellen informed Congress that the federal government had reached the statutory debt limit of $31.381 trillion and would begin “extraordinary measures.” At the time, she estimated that Treasury’s ability to use extraordinary measures would be exhausted as early as June.
Since then, outside analysts have provided additional estimates. The Bipartisan Policy Center estimated the “X date” would occur in the summer or early fall, which aligns with the Congressional Budget Office’s estimate that “the government’s ability to borrow using extraordinary measures will be exhausted between July and September 2023—that is, in the fourth quarter of the current fiscal year.” The BPC added:
“The X Date’s timing will depend heavily on 2022 tax collections in a fragile post-pandemic economy with low unemployment, persistent inflation, and recession fears. If tax season revenues fall far short of expectations, there could even be a ‘too close for comfort’ situation prior to quarterly tax receipts due on June 15.”
While many anticipated that the debt ceiling would be a difficult issue in 2023, the circumstances surrounding the Speaker’s election elevated the challenge. Ahead of the midterm elections, House Republican leadership anticipated a larger majority and viewed the debt ceiling as a messy burden it would need to work through. However, the protracted negotiations over the Speakership election upended the leadership’s agenda and strategy, leading to a decision and commitment to seek significant fiscal restraint as part of any legislation raising or suspending the debt ceiling. Additionally, leadership agreed to pursue a budget resolution that reached balance within 10 years.
Republican leadership understands how difficult and dangerous the debt ceiling fight is going to be. Speaker Kevin McCarthy almost immediately took Medicare and Social Security off the table and House Ways and Means Committee Chair Jason Smith has emphasized that “no debt ceiling legislation that passes through my committee will include cuts to these vital programs. Period.” Nevertheless, President Biden continues to attack Republicans for wanting to hold the debt ceiling hostage to cuts to Social Security and Medicare. The President can make these charges because House Republicans do not have “an ask.” February and March are centered around trying to reach an internal consensus on what the ask should be.
On Wednesday, the House will hold an all-Members briefing with Congressional Budget Office Director Phillip L. Swagel on the CBO’s recently published Budget and Economic Outlook: 2023 to 2033, which projects:
- A federal budget deficit of $1.4 trillion for 2023.
- Deficits generally increase over the coming years; the shortfall in 2033 is $2.7 trillion.
- The deficit reaches 6.9% of GDP in 2033, a level exceeded only five times since 1946.
- Outlays and revenues measured as a percentage of GDP equal or exceed their 50-year averages through 2033.
- Debt held by the public is projected to reach 118% of GDP by 2033, which would be the highest level ever recorded.
- Debt would continue to grow beyond 2033 if current laws generally remained unchanged.
This largely aligns with House Republicans’ main arguments as to why Congress and the White House should negotiate over the nation’s long term-fiscal outlook, and why raising the debt limit is viewed as an appropriate place to begin this discussion.
On Thursday, the Administration will release President Biden’s FY2024 budget proposal, with the aim of using the proposal to continue to highlight the President’s legislative accomplishments while also contrasting his proposal with previous efforts by certain prominent Republicans to overhaul Social Security and Medicare. Treasury Secretary Janet Yellen’s appearance on Friday before the House Ways and Means Committee at a hearing on the President’s FY2024 budget should provide some insights into both sides’ emerging approach to the upcoming debt limit negotiations.
House Republicans hope to put a budget resolution on the floor by the end of April. That blueprint would hopefully provide a menu of options and the beginnings of an “ask.” But failure to pass a budget resolution presumably will not help their leverage. Either way, the Administration and Congress need to begin to get to serious negotiations, probably by May, because if the “X date” comes early, the two sides need to be ready to reach an agreement.
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