Everyone agrees the federal government should make good on its financial promises. It must pay its bills to ensure the well-being of our people — from fulfilling the promises of Social Security and Medicare to providing basic support for human needs like food, housing, health care and education.
Ordinarily, the U.S. has no problem paying its bills — our government bonds are top-rated. But we do have one big problem: A debt ceiling. And if Congress doesn’t act to lift it during this lame-duck session, American families will pay the price.
It’s completely normal for national governments to accrue debt when their investments outrun their revenues in a given year. In an era of bloated military spending, public health emergencies, climate disasters, global economic downturns and the last administration’s massive tax cuts to the wealthy and big corporations, the U.S. government similarly borrows money to fulfill its obligations.
The debt ceiling limits how much the federal government can borrow to make those payments — which makes no economic sense, according to the Economic Policy Institute. Our federal “debt” includes money the federal government owes itself. For example, when the Social Security Trust Fund (a surplus!) expands, the federal debt technically grows. Debt ceiling calculations also ignore $2 trillion in government assets, such as student loan revenues.
The federal government has never defaulted on its debt. But if the debt ceiling isn’t raised, that amounts to defaulting on the American people.
Unfortunately, taking the debt ceiling hostage has become a favorite tool of certain right-wing lawmakers. Again and again, they threaten to hold up funding for seniors, veterans and hard-working families to extort political concessions. In more recent years, efforts by those lawmakers have led to several government shutdowns and a downgrading of our country’s debt rating.
With the GOP set to take over the House next year, some Republican leaders have already vowed to again take the debt ceiling hostage to force program cuts and the privatization of Social Security on the rest of us.
A GOP-driven debt default would lead to a global economic catastrophe, with U.S. securities no longer regarded globally as safe assets. It would also plunge our own economy into crisis, making borrowing significantly more expensive for the federal government. That would drain an estimated $15 trillion from American households as unemployment skyrockets and critical safety net provisions become unaffordable.
The debt ceiling has precisely one use: as a political pawn for extremist lawmakers to demand drastic and dangerous cuts to programs Americans rely on.
Congress should abolish it — now, during this lame-duck session. Short of that, they must at least suspend it, as the Republicans did under President Trump in 2019.
In these last few weeks of Democratic control, congressional leaders have at least four choices:
- Try to get an agreement to raise or suspend the debt ceiling through regular order. This will require at least 10 GOP votes in the Senate to get past a filibuster, which is unlikely.
- Senate Democrats could, by a simple majority vote, change the rules to exempt raising the debt ceiling from the filibuster rule. This would enable them to pass it with 50 votes. However, a few Senate Democrats object to eliminating the filibuster and would likely oppose this move.
- President Biden could ignore the debt ceiling altogether by executive order, drawing on a 14th Amendment argument interpreted by some legal scholars to say that the debt limit is unconstitutional. That surely would face legal challenges from the right.
- The best way forward is for the Senate to raise the debt ceiling by reconciliation, which allows certain budgetary policies to bypass the filibuster threat. Vice President Kamala Harris would be the 51st vote for the Democrats, as she was with this summer’s Inflation Reduction Act, also passed through reconciliation.
The reconciliation process takes at least a couple of weeks. That’s about all the time the Democrats have left in this session of Congress. For the sake of U.S. families, our economy, and the world, they’d better get to work.
Karen Dolan is a fellow at the Institute for Policy Studies.