Debt ceiling fight: This time it’s different. Here’s how

WASHINGTON, Jan 31 (Reuters) – A Democratic President. A new Republican majority in the US House of Representatives is pushing for drastic spending cuts. A rapidly growing mountain of debt – and a showdown that threatens to shake the global economy.

Sound familiar?

These elements, which fueled debate over raising the federal government’s $31.4 trillion debt ceiling, were already in effect in 2011, bringing the country to the brink of default and a downgrade of the country’s prime credit rating led.

Veterans of that struggle warn that this time the politics and the math are harder, making it harder to find a solution until the government runs out of money — or after it does.

“This year is going to be a lot harder than 2011 because of the strident nature of the political discourse,” said Charlie Bass, a Republican who was serving in the House of Representatives during that time.

Unlike most other developed countries, the United States has a strict limit on how much it can borrow. Because the US government spends more than it earns, lawmakers must regularly raise the debt ceiling.

As in 2011, Republicans want to pair this year’s debt ceiling hike with drastic spending cuts to ease annual budget deficits that have skyrocketed in recent years on tax cuts and COVID-19 relief.

President Joe Biden insists Congress must raise the debt ceiling unconditionally and has vowed not to negotiate with Republicans. He will meet with House Speaker Kevin McCarthy on Wednesday to discuss avoiding a default, which Treasury Secretary Janet Yellen says could happen as early as June.

Both leaders experienced the 2011 showdown, Biden as vice president to Democrat Barack Obama and McCarthy as a 3rd House Republican.

Eric Cantor, a second-house Republican who spent hours with Biden trying to find a solution, said the president’s non-negotiating stance could prove untenable.

“He was a big arbitrator at that point, so it’s very different now,” Cantor said in an interview. “I’m not sure how long it will take.”

Biden and several advisers still serving under him were scarred by the 2011 negotiations, according to two officials who were granted anonymity to discuss views within the administration. They were initially shocked that hardened Republicans would even raise the issue after years of dramatically raising the debt ceiling, then decided to negotiate to avoid the worst.

SMALL, STRONG RIGHT WING

McCarthy will have to try to reconcile the demands of a vocal right wing in his party with the reality of a divided government.

His grip on power is weak. Republicans hold a narrow 222-to-212 majority in the House of Representatives, compared to their 242-to-193 majority in 2011, requiring moderates and conservatives to unite.

To win the Speaker’s gavel after Congress convened in January, McCarthy agreed to give each member the opportunity to demand a vote on his impeachment, which could easily lead to his ouster if he voted with Democrats want to work together.

McCarthy also agreed to add three hard-line Conservatives to the Rules Committee, which sets the agenda for the House of Representatives. That could allow them to prevent a compromise from even being voted on.

“That’s an obstacle we didn’t have to worry about in 2011,” said Brendan Buck, who served as an advisor to then-spokesman John Boehner.

Democrats hold a narrow Senate majority, as in 2011, and Republican leader Mitch McConnell is once again in a position to help shape the outcome. Any agreement that emerges from this chamber will require bipartisan support, which could prove difficult for a majority in the Republican House of Representatives.

Some House Republicans protested when McConnell struck a deal in December 2021 to raise the debt ceiling and avoid a default.

Only one in four Republicans serving in the House today retained their seat in 2011, and observers said they may not be fully aware of the risks involved in a default or the reality of a divided administration.

“There are some lessons that can be taught and some lessons that can only be learned,” said Jon Lieber, a former McConnell advisor.

Some recent Republican lawmakers have adopted former President Donald Trump’s confrontational approach to government, adding another layer of risk, said Bass, the former Republican lawmaker.

“I think they’d rather see the United States go bankrupt, the dollar collapse and people’s wealth go down the drain to make a political mark,” he said.

Steve Stivers, a Republican who served in the House from 2011 to 2021, predicts Washington will find a solution before the Treasury Department runs out of money.

“That’s what things like the debt ceiling are built for — they enforce mechanisms that create an artificial deadline,” he said.

Others are less sure.

“I think there’s a greater chance of miscalculations today than there was in 2011,” said Neil Bradley, a former senior consultant at Cantor.

reporting by Andy Sullivan; Additional reporting by Trevor Hunnicutt; Editing by Scott Malone and Howard Goller

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