The Case for Debt-Ceiling Optimism

As the government careens toward the brink of default without a deal to lift the debt limit, an unlikely source of reassurance has emerged.

I think everyone needs to relax, Mitch McConnell told reporters on Tuesday in his home state of Kentucky. The country will not default. The longtime Republican leader, who once boasted of being the Senates grim reaper, isnt known for his soothing bedside manner. His equanimity was hard to reconcile with the vibes emanating from the Capitol on that particular day, where House Republican negotiators were accusing their Democratic counterparts in the White House of intransigence and insisting that the sides remained far apart.

The Treasury Department has said that if Congress does not raise the nations borrowing limit, the government could, as early as June 1, default on its debt for the first time. The economic repercussions could be catastrophicfirst a market crash, then, economists believe, a recession. Because the House and Senate would need at least a few days to approve any agreement that President Joe Biden strikes with Speaker Kevin McCarthy, the real deadline could be even sooner.

But McConnell, who has spent nearly half of his 81 years on Earth in the Senate, has seen more than a few difficult negotiations. Despite all the histrionicsthe censorious sound bites, the red lines each side has drawn, the breakdowns and pausesthe talks thus far havent looked all that different from past Washington deadline dances, which tend to end with a deal. This is not that unusual, McConnell said.

Read: Why Biden caved

The public feuding is actually a good sign, and so, in a way, is the delay. They need this to run to the very last minute, Brendan Buck, a former aide to Speakers John Boehner and Paul Ryan, told me. As Buck sees it, the theatrics between GOP and Democratic leaders is a necessary precursor to a deal, because it shows partisans on their respective sides that they fought as hard as they could before reaching a compromise.

Biden and McCarthy are trying to find a solution that can pass both a Republican-controlled House and a Democratic-controlled Senate. A quick-and-tidy agreement is likely to be viewed suspiciously by both parties, and particularly the GOPs hard-right faction, which made McCarthy sweat out 15 votes to become speaker. Theres no way McCarthy could have walked in two weeks ago, had a one-hour meeting with the president, and come out and said, We have a deal, Matt Glassman, a former congressional aide who is now a senior fellow at Georgetown Universitys Government Affairs Institute, told me. That would be just deadly for him with his conference.

Todays impasse has drawn comparisons to the debt-ceiling negotiations in 2011 between Boehner and then-President Barack Obama. Those talks featured even more drama, including the sudden collapse of a grand bargain and, later, a worried prime-time address to the nation from Obama. Even though the two parties have since drifted further apart (mostly thanks to the GOPs move rightward), the gap between them in these negotiations is much smaller.

Back then, Obama was pushing aggressively for tax increases, while Boehner wanted several trillion dollars in spending cuts, including major changes to entitlement programs. Biden initially took a harder line this time, refusing for months to engage McCarthy in negotiations over the debt ceiling. But since backing off that position, hes made only half-heartedand swiftly rejectedattempts to get McCarthy to raise taxes or make any kind of policy concession. To the frustration of progressives, hes even seemed willing to tighten work requirements for people receiving federal safety-net benefits. Republicans, for their part, have agreed not to seek cuts to Medicare or Social Security. I dont actually think this is that difficult of a deal to reach, Buck said. Getting that deal through the House and the Senate, he said, will be more difficult, which is why both Biden and McCarthy will need to save the biggest deadline pressure for the votes themselves.

Conor Clarke: There is no constitutional end run around the debt ceiling

By most accounts, the parties are haggling chiefly over whether to freeze government spending at current levelsBidens latest offeror cut as much as $130 billion by reverting to 2022 spending, as Republicans have proposed. Republicans want to exempt the Defense Department from any cuts, which is a sticking point for Democrats.

Considering the yawning philosophical differences between the parties, thats not much of a gap. Compromising over numbers isnt that hard, Glassman said. Its not like compromising over abortion.

Look closer and there are other reasons for optimism. Although some of McCarthys members are urging him to hold fast to the conservative provisions of the debt-ceiling bill Republicans narrowly passed last month, the speaker has moved off those demands. Even the blowups have been timed, either intentionally or coincidentally, to avoid spooking investors and causing stock markets to slide. The White House meetings between McCarthy and Biden, for example, have all occurred after the markets closed, and the biggest breakdown in the talks (so far) happened over the weekend before negotiations resumed on Monday.

Republicans have many reasons for not causing a stock-market crash; the simplest is that they and many of their constituents would stand to lose a lot of money. Another possible reason is that party leaders, and McConnell especially, seem to recognize that a panic over the debt ceiling is not in their political interest and could undermine their negotiating position.

McConnell is not a soothsayerhis prediction that Donald Trumps grip on the GOP would loosen, for example, has not exactly panned out. Nor is his confidence that the country will avert default merely a forecast from a disinterested observer. If McConnell is saying it, he must think it benefits Republicans for him to do so.

But even a self-interested assurance is one more indication of hope, a sign that Republicans want to prevent economic disaster. A debt-ceiling deal between Biden and McCarthy remains more likely than not. It might just take a few more days of posturing and setbacks before it happens.



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