The federal government may have less than a month left before defaulting on its economically devastating debt.
No matter who is politically blamed for the fiasco, aides acknowledge that President Biden has a lot to lose if the nation goes into recession just as he moves into his re-election campaign.
Mr. Biden has several strategic options as he tries to prevent that from happening. All of which have been the subject of discussion within the administration and with Democratic allies in recent weeks. These range from continuing to wait for Republicans to raise the nation's debt limit with no strings attached to setting up unilateral actions to effectively cross the line and continue to pay the nation's bills.
Some involve negotiating with Republican leaders, which Biden said had nothing to do with debt limits although they would.
Each path carries risks, which administration officials privately admit. The biggest so far has been an economic disaster: White House economists warn an analysis was released on Wednesday that if the country defaulted on its debts and those defaults continued for several months, the economy would lose eight million jobs when it entered recession.
The economists also warned that just getting close to the possibility of default would destabilize markets and raise borrowing costs throughout the economy, “scarring the ability of companies to finance themselves and engage in the productive investments that are essential to furthering current expansions.”
Here are the paths available to Mr. Biden, as his aides and allies see.
Nonetheless
Mr. Biden has insisted for months that lawmakers should raise the nation's borrowing limit unconditionally, saying that it only allows the United States to pay for spending that Congress has authorized. He can keep at it, refusing to negotiate, as so many progressives encourage.
This would be an attempt to belittle House Republicans, who last week passed a bill that pairs limit increases with cuts in federal spending and a reversal of Mr. Biden's climate agenda. Mr. Biden would effectively challenge Speaker Kevin McCarthy of California to allow the government to run out of cash to pay its bills on time, which the Treasury Department predicts could happen as early as June 1.
The risk is that Mr McCarthy refuses to give in, pointing to the House bill as evidence that Republicans have done enough to raise the debt limit. Mr. Biden will be counting on pressure from business groups and turmoil in financial markets to get Republicans to blink at the last minute and at least pass legislation to avoid defaulting for weeks or months. But until now, House Republicans had shown no willingness to pass such a bill, known as a “clean” debt limit increase. No critical Senate Republican mass is needed to advance a bill in that chamber.
Negotiate spending cuts that are not tied to a debt limit
Mr. Biden will welcome Mr. McCarthy and other congressional leaders to the White House next week to talk about fiscal policy — how much the nation taxes, spends, and borrows. The president said the talks were separated from the debt limit, but they weren't.
The deadline depending on the talks is the so-called X-date, presumably June 1; Mr. Biden's invitation to congressional leaders was sped up by revised projections for when that date would be reached. By contrast, the bill funding the federal government's operations, which Biden signed late last year, runs through the end of September.
Mr. Biden can negotiate without “negotiating” by trying to broker a preliminary agreement on spending levels for the next fiscal year, before the X-date. Instead, Mr. McCarthy will commit to providing a net extension of the debt limit.
Business groups and even some administration officials expect such a deal to center on limits on federal discretionary spending — though almost certainly not as stringent as those in the bill Republicans have passed. White House officials have been saying privately for months that they don't expect the House to approve a significant increase in spending over the next year, so some sort of cap might suit Mr Biden, depending on the details.
The risk of that strategy is that Mr. The most conservative McCarthy has shown no appetite for a deal in that sphere. Mr. Biden will accept no greater demands from the member. That complicates the prospect of a deal going through the speaker.
Skip McCarthy
Mr. Biden could try to bypass the speaker and try a handful of moderate Republicans in the House and Senate to vote to raise the limit, offering some fiscal concessions as inducements. Getting such a deal to the floor of the House may require several legislative maneuvers, such as the so-called waiver petition that Democrats have been preparing for months.
It could also require a different approach from Mr. Biden to the Republican members of Congress that he needs to pass such a bill. Moderate Republicans in the House say they've received little friendly outreach from the White House so far. Instead, Biden administration officials gleefully pummeled them for voting to advance the Republican debt limit bill and its deep spending cuts.
This week administration officials have been posting, time and again, headshots and the names of House Republicans on Mr. Biden, accused them of choosing to cut funding for veterans programs and Meals on Wheels. Two of the featured MPs are members of the leadership, including Mr. McCarthy. The other two are well-known right-wing congresswomen. The remainder — more than two dozen — are lawmakers in the seats Biden won in 2020.
Officials have defended the strategy. “I hope we will find a way to avoid default,” Shalanda Young, the White House budget director, told reporters on Thursday, after attacking the budget cuts included in the Republican bill. “But it's our job to keep coming to you, to go to the American people, and make sure people understand what this debate is about.”
Do it yourself
If Mr. Biden's chosen tactic does not result in the bill he is about to sign that raises the debt limit by X, the president will have to choose between letting the state default or pursue what is effectively a constitutional challenge to the debt ceiling by continuing to borrow to pay bills when the government runs out. cash.
That challenge will be rooted in a clause in the 14th Amendment that stipulates that the government must pay its debts. Administration officials have been debating the idea, without resolution, for months. But even its proponents admit it's not a perfect solution. The move would attract an immediate court challenge and sow at least temporary uncertainty in bond markets, sending the government's borrowing costs soaring.
Catie Edmondson reporting contribution.