How the US debt ceiling turned into a political game of chicken in 2023

The US might default as early as June 1 2023 if Congress does not extend the limit before then, making this week crucial for talks on raising it.

The leaders of the House and Senate from both parties will meet with Joe Biden on Tuesday at the White House to discuss the looming economic disaster that they have caused.

The US government might reach the national debt ceiling as soon as next month. As a result, the federal treasury won't be able to borrow any more money. It will use up all of the money it has to pay for everything from current debt repayment to government wages and old retiree benefits.

The debt ceiling may be raised at any time by a vote in Congress, but the Republicans in power only want to do so if they can persuade Mr. Biden and the Democrats to make political concessions. The president and his supporters have so far refrained from taking part in this debate, which they believe is being compelled by the possibility of a financial collapse.

Mr. Biden already made a little compromise by agreeing to the meeting because, until recently, he had refused to discuss Republican proposals. He has previously insisted that talks about expenditure and policy be undertaken separately from the debt-limit problem.

A Simple Guide to the US debt ceiling crisis

The biggest risk is the possibility that the US could actually reach its debt ceiling and trigger a financial meltdown on a global scale. This sets up a high-stakes encounter that is rife with danger. There are other dangers - and advantages - for both sides beyond that, though. Here is a picture of them.

Democrats with Joe Biden

Which do they seek?

Democrats don't engage in debt-limit brinksmanship. They haven't threatened a default, for example, if the Republicans refuse to raise the minimum wage, increase access to government-funded healthcare, or increase taxes on the rich, all of which are party priorities. They don't want Republicans to play the game, either.

It has been more than ten years since congressional Republicans first forced a resistant Democratic president to make policy concessions by raising the legal ceiling on the national debt. Democrats consider this strategy to be extreme brinksmanship. Many people want to put an end to the practice once and for all, including high-ranking Biden administration officials who were there during the first debt-limit battle.

They are advocating for a "clean" debt limit increase or one that is not connected to any other legislative actions. They assert that their rivals are only concerned about the national debt when Democrats are in power. They cite the three occasions during the Trump administration when the debt limit was temporarily raised as proof and the hundreds of billions added to the national debt from Republican-backed spending and tax cuts.

What are the risks?

The US and international financial markets may become more uneasy as the country gets closer to the debt ceiling cliff. The US saw a fall in credit rating and an increase in interest rates on its current debt the last time this occurred. The US economy could suffer even if the nation avoids going over the fiscal cliff.

What effect this will have on politics is difficult to predict. Recent research found that the general public's position on this issue is evenly divided; while a third of respondents would hold Mr. Biden liable in such a case, a third would hold Republicans accountable, and a third is unclear. And because the president and Democrats in Congress are up for reelection the next year, this uncertainty is the root of many sleepless nights for them.

Democrats, who are the incumbents, stand to lose more if the economy is destroyed during this impasse. They are likely to receive blame when unemployment increases and the stock market crashes since they are in positions of power. For many Democrats, the price of losing an election is larger than the price of winning.

Democrats in Congress are urging Mr. Biden to concede ground to the opposition party. If the party abandons its principles, Mr. Biden might be compelled to recant, upsetting his party's hard-liners on the debt ceiling. It would give him the appearance of weakness at a time when some members of his party are already concerned about his capacity to serve as their standard-bearer the next year.

McCarthy with the Republicans 

What are they seeking?

Republicans want to halt the growth of federal programs that Vice President Biden and the Democrats have supported. They want to cut back on government expenditure, or at least on Democratic objectives. With only one chamber of Congress under their control, they have limited power to pass legislation to accomplish their goals through dialogue and compromise.

The debt ceiling gives Republicans in the House of Representatives a way to demand more significant concessions. For instance, two weeks ago, House Republicans unanimously approved legislation over unified Democratic opposition that would link an increase in the debt ceiling to spending restraints and budget cuts. The Senate will not allow it to pass.

Republicans would have won if they could persuade Democrats to support even some of their legislative initiatives. The package, in the eyes of some party hardliners, is not a starting point for negotiations, but rather the very minimum they would tolerate in exchange for a rise in the debt ceiling.

What dangers exist?

 

Republicans are engaging in risky behavior. Like Democrats, they run the risk of an economic disaster that makes their party the focus of public criticism and all of the ensuing electoral repercussions.

 Republicans' margin in the House of Representatives is extremely slim, even though they will have fewer incumbents to defend at the polls the next year. The party could revert to being in the minority in the chamber with even a little change in voter sentiment. Next year, Senate Republicans anticipate regaining the majority, but one slip-up might make it impossible.

One of the main themes of Vice President Biden's reelection campaign would be significantly impacted if the general public see Republicans as an extremist party unfit for office.

Speaker of the House Kevin McCarthy is likewise faced with unique difficulties as a result of the debt-limit brinksmanship. In that chamber, he has a shaky hold of authority. He might enrage centrists looking forward to challenging re-election campaigns if he maintains his position in discussions. Conservative hardliners in the house, who only reluctantly supported his speakership, could vote to remove him from office if he strikes a deal with Democrats.

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