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Congress Is Locked In A Familiar Standoff That Could Have Big Economic Consequences

Congress is in a familiar political standoff over spending and debt that could have serious economic consequences.
Congress is in a familiar political standoff over spending and debt that could have serious economic consequences.

Congress has fewer than 10 days to pass legislation to prevent another partial government shutdown, and Democrats hope to use the deadline pressure to force Republicans to help them pass a critical suspension of the federal borrowing cap.

Republican leaders have flatly rejected that plan, leaving Congress in a familiar political standoff over spending and debt that could have serious economic consequences.

Democrats are moving ahead with a bill that would both extend current spending levels through Dec. 3 and suspend the cap on federal debt through the end of 2022.

The legislation also includes a total of $28.6 billion for communities recovering from natural disasters that occurred over the past 18 months and $6.3 billion in aid for Afghan refugees.

The House voted on the bill Tuesday evening, passing the measure on party lines — 220 Democratic votes in support and 211 Republican votes against.

Democrats had sufficient votes to pass the legislation without Republicans in the House. But the fate of the bill is far less certain in the Senate, where GOP leaders have vowed to oppose it over objections to Democrats' broader spending ambitions.

Democrats hope to strong-arm approval of the package by arguing upfront that Republicans would be to blame for wide-ranging economic harm if they vote against it.

"The House will not allow the United States government to default on its obligations for the first time in American history," said Rep. Hakeem Jeffries, D-N.Y., the chairman of the House Democratic Caucus. "It is our hope that Senate Republicans will also do the right thing and stop playing politics around the debt limit."

Republicans are showing no signs of budging

Senate GOP Leader Mitch McConnell, R-Ky., has said Republicans would support a spending bill that includes basic government funding paired with disaster funding and money for Afghan refugees — but not if the bill addresses the debt limit.

"We do not have divided government. Democrats do not need our help," McConnell said in a statement. "They have every tool to address the debt limit on their own: the same party-line process they used to ram through inflationary spending in March and already plan to use again this fall."

Democrats are ignoring McConnell's warning and moving ahead with their strategy. They argue that Republicans helped drive up the debt both with partisan policies like the 2017 tax cuts and with bipartisan spending on COVID-19 relief.

Senate Majority Leader Chuck Schumer, D-N.Y., insists that both parties need to take responsibility for the debt that has already been incurred.

"The Republicans are doing a dine-and-dash of historic proportions that hurts the American people and hurts our country," Schumer said Monday on the Senate floor. "In the immediate future, both parties will have to come together to allow the federal government to continue its most important responsibility: paying the bills and making good on our outstanding obligations."

The debt limit increase is a familiar political fight

Democrats insist that raising the debt limit is a routine part of governing. It is a cap Congress sets on how much the government can borrow and typically applies to payments on debt for spending that has already occurred.

Congress has voted to adjust the borrowing limit 17 times in the past 20 years, making it a near-annual legislative task.

But many of those changes only happened after intense partisan bickering.

Nadeam Elshami was a top adviser to House Speaker Nancy Pelosi, D-Calif., in 2011 when the credit agency Standard and Poor's downgraded the nation's credit worthiness in a similar standoff.

Elshami, who is now the policy director at the lobbying firm Brownstein Hyatt Farber Schreck, says both parties should have learned the lesson that even the threat of a default can seriously harm the economy.

A downgrade would impact everything from interest rates on mortgages to the market value of retirement funds.

"You are risking the economy of the United States, you are risking the full faith and credit of the United States, you're risking another downgrade," Elshami said. "Say you're a teacher who has a retirement fund — that's going to go down. You're going to be paying more for a car. This is the ripple effect."

This year, Democrats are sticking with the message that Republicans should follow past precedent and support Democrats in suspending the cap until December 2022.

Pelosi told reporters earlier this month that debt limit increases are usually bipartisan.

"Democrats supported lifting the debt ceiling because its the responsible thing to do," Pelosi said. "I would hope the Republicans would act in a similarly responsible way."

But McConnell has been unmoved by the argument. He has said for months that he and other Republicans will not help pass a debt limit hike so long as Democrats are pursuing a plan for more than $3 trillion in new spending.

Those who know McConnell best say he's not going to budge and neither are other Senate Republicans. Rohit Kumar served as McConnell's deputy chief of staff and now co-leads the national tax practice at the firm PricewaterhouseCoopers.

"There is this sense that he's bluffing or there are 10 votes for the taking without his blessing, and I think that's just wrong," Kumar said in an interview. "I think folks misread him at their own peril."

Kumar said political bickering over the borrowing policy is both predictable and bad for the economy. Both sides have used the critical issue since at least the 1980s to try to force the other party to agree to political concessions.

Democrats argue precedent

This latest political fight over the debt is infuriating Democrats like Sen. Kirsten Gillibrand of New York. Democrats voted to increase the borrowing cap under then-President Donald Trump even as the debt ballooned when Republicans approved costly tax cuts and partisan spending priorities.

"It is quite rich coming from a party, and the party of Trump, who did $1.5 trillion in tax cuts and didn't pay for a penny of them," Gillibrand said in an interview with NPR.

Democrats have said Republicans need to take ownership of the debt they helped create — both through partisan legislation and when Congress voted for bipartisan COVID-19 relief spending under Trump.

Republicans say its not that simple.

In recent years, Democrats did go along with some debt limit increases under Trump but often while the two parties were working out bipartisan priorities, such as avoiding spending caps.

The current political environment is different. Democrats hope to use budget rules to approve more than $3 trillion in spending without any Republican votes and Republicans are responding by taking advantage of the political moment.

Democrats like Elshami say voting for the debt limit increase should be about protecting the economy, not political bickering.

"You can't ask Democrats for help one Congress and then turn your back the other Congress," he said. "I think Republicans should do the right thing and work with Democrats to get this done."

NPR political reporter Alana Wise contributed to this story.

Copyright 2021 NPR. To see more, visit https://www.npr.org.