Sen. Mitch McConnell had a message for Americans increasingly worried that the economy will crash if the federal debt ceiling is not raised: Just relax.
“Look, I think everybody needs to relax,” Mr. McConnell, the Kentucky Republican and minority leader with deep experience in debt-limit settlements, told reporters at home earlier this week. “Regardless of what can be said about the talks on a daily basis, the president and the speaker will come to an agreement. It will ultimately produce a bipartisan vote in both the House and Senate. The country will not default.”
That may be easier said than done. While Mr. McConnell, President Biden and Speaker Kevin McCarthy have repeatedly assured Americans that there will be no default, that assurance is looking a little shakier with a little more than a week to go before the U.S. Treasury Department is projected to run out of money for to pay their obligations.
Even if negotiators agree on a deal soon — an outcome that appeared to be within reach but still hadn’t materialized as talks continued Friday — much remains to be done, not the least of which is winning approval in the House and Senate. This outcome is far from certain given growing unrest – and some outright opposition – on both the right and the left. At this point, no one can be absolutely sure that the United States will not topple over the standard cliff, although no one involved wants that to happen. Time is short.
“No one can guarantee that there won’t be a default, if for no other reason than the clock is ticking down here pretty quickly,” said G. William Hoagland, a longtime Republican budget guru on Capitol Hill who is now senior vice president at Bipartisan Policy Center. “We are on thin ice to a large extent.”
Traders were given some breathing space on Friday afternoon with the Finance Minister’s announcement that the default deadline had been moved four days later, to 5 June. But Congress will still be hard-pressed to act by then, and the short extension may even backfire, ruining something. there is an urgency to seal a deal.
“We’re within the window to be able to execute this, and we’re going to have to come to some really tough conditions in these closing hours,” said Representative Patrick T. McHenry, Republican of North Carolina and chief negotiator for Mr. McCarthy. “We’re going back to recent, important issues, and it’s just not resolved.”
Since the beginning of the impasse, Mr. Biden and congressional leaders have sought to allay concerns that a default would occur, essentially saying it was unthinkable because Congress has narrowly avoided default before. After one of the high-level White House meetings, Senator Chuck Schumer, the New York Democrat and majority leader, cheered the fact that all four leaders had said default was off the table.
Part of their motivation for offering these constant assurances was to bolster their own power, calm the public and prevent financial markets from cratering as the talks continued.
But President Biden changed his tune slightly during his visit to Japan last weekend, saying for the first time that if Republicans insisted on pushing the issue to the docket, perhaps default was an option after all.
“I can’t guarantee they won’t force a default by doing something outrageous,” Biden told reporters. “I can’t guarantee that.”
Representative Hakeem Jeffries, Democrat of New York and the minority leader, expressed a similar sentiment when asked this week if he could still be confident that the government would not default.
“Not with this group,” he said, referring to Republicans, some of whom he suspects would not mind the financial chaos of a default if they thought it might help them politically in 2024.
Mr. McCarthy, the House leader and a California Republican, has also repeatedly stated that there would be no default and stressed on Friday that he believed a positive outcome would result.
“I’m a total optimist,” he told reporters as negotiations continued without an apparent breakthrough.
One way Mr. McCarthy has said a default could be avoided is for the Senate to pass and for the president to sign the measure Republicans passed in the House of Representatives to raise the debt limit while making deep budget cuts and rolling back other Biden administration initiatives. But that is unlikely to happen even if the treasury runs out of money. Mr McCarthy has also ruled out an emergency short-term suspension of the debt ceiling.
Even a deal between House Republicans and Mr. Biden would not end the drama; in some ways it would only be the beginning.
Republicans in the House of Representatives have a 72-hour rule for the time between the legislation being published and it being voted on, a timeline that pushes the settlement ever closer to the Treasury Department’s deadline in early June.
In addition, with hard-right elements of the Republican convention joining progressive Democrats in expressing reservations about the deal taking shape, Mr. McCarthy and Mr. Jeffries may have to thread the needle to produce the necessary votes from both sides to get approval of the agreement.
Mr. McCarthy and his leadership team will have to assess extremely precisely the number of Republicans committed to voting for a final budget deal with a debt limit increase attached. Then they must tell Mr. Jeffries how many votes Democrats need to produce to ensure that at least 218 lawmakers will support the package.
Miscalculation can spell disaster. When the nation was in the throes of a severe financial crisis in September 2008, the House stunned the Bush administration by failing to pass the bank bailout. In a chaotic turn on the floor, the measure failed as many Republicans refused to support it despite presidential urgings, and some Democrats also balked. The stock market fell in real time as the vote unfolded. Four days later, rattled House members returned and approved the proposal with a few changes.
Some believe it may take a similar scenario now to push the debt ceiling plan through Congress — a failed vote and market downturn that underscores the economic consequences of a default and motivates lawmakers to act. Others prefer that it not come to that given the potentially serious consequences of even a brief default.
“I’ve been of the optimistic view that it wouldn’t happen, but the longer it goes on, the more likely it seems to me,” said Mr. Hoagland, the budget expert. “Time has run out to get this done, but I’m just praying that a default doesn’t happen.”
Luke Broadwater contributed reporting.