On Saturday, US President Joe Biden, of the Democratic party, and House Speaker Kevin McCarthy, of the Republican party, made an agreement to raise the “debt ceiling”, or the amount of money that the state can borrow on the markets. The “debt ceiling” is a limit imposed at the federal level and has been in force since 1917: every time the government approaches that limit, Congress must vote to raise it. Usually there really isn’t a risk that Congress will vote against raising the debt ceiling, because doing so would have dire consequences for both the US and global economies. This year is one of those rare times when things have not gone smoothly.
In recent months, some representatives of the Republican party, which controls the House, have shown themselves willing to send the country into default if Biden has not satisfied some of their requests: going into default means running out of money to pay government employees, the army, health care programs, finance public works and meet its financial obligations to investors. Many of these requests were eventually included in the deal reached between Biden and McCarthy. Now both must convince lawmakers from their own party to vote for the text of the agreement, which has yet to be officially presented to Congress. The one who is having the most difficulty is Biden, who according to many Democratic exponents has given in too much to the demands of the opposition to favor compromise, a trend that has characterized a good part of his political career.
Ever since he ran for the Democratic party primaries in view of the 2020 presidential elections, Biden has shown that he believes strongly in the possibility of collaborating with the Republicans on various issues. Some of his most ambitious projects approved by Congress – such as the one that allocates a trillion dollars for the construction and repair of infrastructure and the investment program to revive the US semiconductor industry – have also passed thanks to the votes of some Republicans.
“But this is not a historical moment in which bipartisanship is seen as a value, as it was in the seventies, eighties and nineties, when Biden was a senator”. writes journalist Peter Baker on the New York Times. According to Baker, who has been involved in US national politics for decades, “desire [di Biden] Positioning himself as the leader who can unite a deeply divided country is central to his re-run for a second term next year. But it runs counter to the interests of many Democrats, who see greater political advantages in being tough with the Republican party and prefer to draw a clearer difference between them and the Republicans ahead of the 2024 election, when they hope to win back the House.
In the case of the debt ceiling deal, Baker believes Biden “is betting on the assumption that Americans will appreciate a mature leadership that doesn’t gamble with the nation’s economic health.” The agreement suspends the need to vote annually on the debt ceiling until January 1, 2025, to avoid having to discuss it again in a year, when the upcoming presidential elections will make it even more difficult to find a compromise between Republicans and Democrats.
According to Biden, the agreement “is an important step forward that reduces spending but protects important welfare plans for workers” and “the priorities and legislative achievements of my administration and the Democrats in Congress”. However, Biden admitted that “the agreement is a compromise, which means that not everyone will get what they want”. McCarthy instead said that the agreement contains “historic reductions in spending, important reforms that will lift workers out of poverty and a reduction in excessive government meddling”, without adding any new taxes. This last point in particular was seen as a defeat by many Democrats, who hoped to push through a new wealth tax and broaden the base of people eligible for a discounted price on insulin.
There were risky but viable alternatives to seeking an agreement with the Republicans on the issue. Among Democrats, for example, there was the idea of ignoring the debt ceiling altogether: according to various expertsIndeed, the 14th amendment to the US Constitution would give the president the authority to order the payment of state debts without the need to ask Congress for permission (therefore simply getting into debt). It’s an amendment that was designed to keep the split between Northern and Southern from creating problems paying state debts after the American Civil War, but some think it applies today.
Opting for this solution would have meant not having to bargain with the Republicans, but it was considered too dangerous a scenario: the country would have risked going into default anyway, since the Republicans would undoubtedly have asked for an opinion from the Supreme Court on the matter and the sentence would probably come after months.
Biden therefore had to seek a compromise with the Republicans: the agreement that emerged lacks several plans that the Democrats hoped to achieve – such as a tax increase on large estates – but most of the objectives already achieved by the administration are still protected Biden, who the Republicans wanted to erode instead.
Republicans initially wanted Biden to block his plan to forgive $400 billion in college loans for millions of indebted Americans. They also wanted to remove many of the incentives for the transition to energy from renewable sources included in the Inflation Reduction Act, i.e. the federal law approved last August which aimed to curb inflation by reducing the deficit, lowering the prices of prescription and, in fact, investing in the production of internal energy while promoting energy produced in a sustainable way. Neither of those things happened.
There were also fears that Biden would give in to Republican insistence that he expand the requirements for access to Medicaid (the program that provides health care to low-income individuals and families), food assistance and other forms of welfare. Instead, Biden accused the Republicans of wanting to “take food out of the mouths of hungry Americans”. The main concession he has made to them is to raise the age by which able-bodied adults without children must work to get food stamps, but access to the same program has been extended to veterans and homeless people.
“The challenge now for Biden is to sell this compromise to his fellow Democrats,” Baker writes. “Just as Mr. McCarthy knows he will potentially lose dozens of votes of disappointed Republicans by the compromise he has found, the president expects many of him in his own party to vote against the final product. But he needs to get enough Democrats to make up for Republican defections and forge a bipartisan majority.” The deadline for doing so is June 5th.