Staying Positive: What Happens When (If?) A Debt Limit Deal Is Struck?
The brinksmanship continues. The two parties still have not struck a deal to lift the federal borrowing limit. As a result, in a letter sent to House Speaker Kevin McCarthy (R-Calif.) on Monday, U.S. Treasury Secretary Janet Yellen said “it is highly likely” that by early June — perhaps even June 1 — the Treasury Department will be unable to pay all of the nation’s bills.
Yesterday, Republican negotiators said there is still a “significant gap” between the White House’s and GOP lawmakers’ positions. Negotiators still have not agreed on topline discretionary spending levels and other sticking points, including work requirements for federal benefit programs.
Today’s date is May 24. June 1 is eight days away. Plenty of time, at least in Washington terms, right?
Not quite. In reality, Congress does not have eight days. House and Senate rules do not allow congressional leaders to ram through a deal within hours of striking it absent the consent of a majority of votes in the House and all 100 members of the Senate.
Accordingly, President Biden and Speaker McCarthy probably have today to strike a deal and not much more.
Let’s take a look at the rules that will govern House and Senate floor debate when (if?) President Joe Biden and Speaker McCarthy ever do strike a deal.
Speaker McCarthy constrained by 72-hour rule
Once (if?) White House and Republican negotiators reach a deal, House and Senate Budget Committee members will need to put pen to paper to write an actual piece of legislation. Given the broad reductions to spending across a wide range of government agencies and programs, that will be no small feat. Once the bill is written, though, the Congressional Budget Office (CBO) must review the bill to assess the economic and fiscal implications of the legislation. (The CBO is required to produce a cost estimate for nearly every bill approved by a Senate or House committee.)
While members of the Budget committees and the CBO certainly will expedite this work, there is no telling how long these two steps will take. They will surely take more than a few hours and could even take a couple of days.
Readers also may recall that during his prolonged fight to become speaker of the House, Rep. McCarthy agreed that he would ensure rank-and-file lawmakers have at least 72 hours to review all legislation that comes up for a House floor vote. As CBS News explained back in January, Speaker McCarthy was pressured into supporting this idea, called the 72-hour rule, after “many Republicans decried the circumstances surrounding [last year’s] the $1.7 trillion government spending package, which was voted on by Congress shortly after the text of the mammoth legislation was released.”
Speaker McCarthy would face serious backlash if he abandons the 72-hour rule in his first major fiscal fight with Democrats.
In fact, the decision could cost Speaker McCarthy his leadership position. Recall that another part of the rules package that made Rep. McCarthy the House speaker was a change to the motion to vacate the chair, a procedural tool that can be leveraged to remove the speaker. House rules previously required a majority vote by a party caucus or conference for a motion to vacate to be brought up for a vote. Rep. McCarthy lowered that number to just one. A single disgruntled House member could use the motion to vacate to launch a campaign to have the speaker removed.
If Speaker McCarthy upsets just one member of the Republican caucus by his handling of the debt ceiling negotiations, chaos could very shortly follow chaos.
That’s why, according to NBC News, Speaker McCarthy has said repeatedly both in public and in private that he will abide by the 72-hour rule for the debt ceiling bill.
Once (if?) the House successfully approves a bill, the legislation will have to be formally sent over to the Senate for consideration. Again, while this formal action could be expedited, it takes precious hours at a time when those hours are few.
And what happens once the Senate has the bill? Let’s take a look.
Senate debate could take even longer
If Speaker McCarthy’s 72-hour rule requires the House to move slowly, Senate tradition and its long-standing customs and regulations mean consideration in the upper chamber of Congress will take as long, if not longer, than it will in the House.
Some history: Writing to Thomas Jefferson in 1787, James Madison, one of the authors of the U.S. Constitution and the Federalist Papers that defended it, explained that he thought the Senate should be the great “anchor” of the government. (Note the use of the word “anchor” and not “propeller.”) The upper chamber of Congress was to be a “necessary fence,” Madison said, against the “fickleness and passion” of the House where lawmakers were elected every two years and were, therefore, closer to the whims of the people.
Additionally, according to Senate historians, George Washington “is said to have told Jefferson that the framers had created the Senate to ‘cool’ House legislation just as a saucer was used to cool hot tea.”
The Senate was never meant to act with haste, and it almost never fails to live up to its historically rooted expectations.
Practically, this means the vote on a bill to increase the debt ceiling will be a two-step process. First, senators will have to vote to invoke cloture, or to limit further debate on the matter. As the Congressional Research Service (CRS) has pointed out, “There are several stages to the process of invoking cloture.” These steps include:
Getting 16 senators sign a cloture motion;
A formal presentation of the cloture motion on the Senate floor in which a senator interrupts a colleague to ask that the motion be read by the Senate clerk;
Hearing of the cloture motion on the second calendar day on which the Senate is in session (if, for example, the motion is filed on Monday, it lies over until Wednesday, assuming the Senate is in session daily, but if the motion is filed on Friday, it lies over until Tuesday unless the Senate was in session on Saturday or Sunday); and
A Senate vote on the cloture motion one hour after the body convenes on the second calendar day after the cloture motion was filed and after a quorum has been convened.
As a reminder, it takes 60 senators for a successful cloture vote. If that threshold is not reached, the process starts over — kind of. As CRS has explained, at this point, the “majority leader may enter a motion to reconsider the cloture vote. This allows the majority leader to call up the motion at a subsequent time when he feels he has the votes and thereby obtain an immediate second vote on cloture.” (Emphasis added.)
When (if?) lawmakers invoke cloture, senators have 30 hours (more than a full day) left to debate the matter, after which a final vote on the matter can be taken. The Senate can move more quickly, but only if no one senator decides to elongate the legislative process.
Once (if?) both the House and Senate approve a piece of legislation, the bill is enrolled and then presented to the president. Here is how CRS describes enrollment:
The secretary of the Senate reviews the legislation to make sure it is correct;
The House clerk also looks at the bill to make sure that it is correct;
The House clerk certifies the bill as having originated in the House;
Presiding officers of each chamber, including the speaker of the House, sign the bill; and
Then the bill goes to the president.
Again, this part of the process could happen relatively quickly, but will still take precious hours the U.S. economy can hardly spare since, with each ticking moment, investors, small business owners, Social Security recipients, federal workers who would like to get paid, and international markets are getting more nervous.
Economic fallout starting
In her letter, Secretary Yellen reminded Speaker McCarthy that past debt ceiling brinkmanship has caused serious economic harm. After the 2011 debt ceiling standoff, for example, the Government Accountability Office estimated the crisis raised borrowing costs by a total of $1.3 billion in a single year. According to the Committee for a Responsible Budget (CRB), the 2013 debt limit impasse cost between $38 million and $70 million.
Federal policymakers have been warned about the potential costs of the current standoff.
The CRB noted a Moody’s Analytics report from earlier this year estimated “a default could have similar macroeconomic consequences to the Great Recession: a 4 percent Gross Domestic Product (GDP) decline, nearly 6 million lost jobs, and an unemployment rate of more than 7 percent. In addition, Moody’s predicted a $12 trillion loss in household wealth, with stocks dropping by as much as one-third at the depths of the selloff.”
Last week Dr. Gerald Cohen, chief economist at the Kenan Institute of Private Enterprise, wrote, “Even if the debt limit were increased today, the uncertainty created by the impending debt ceiling deadline has already raised the cost of borrowing and is impeding some hiring and investment.” The New York Times agreed.
So, while eight days may seem like plenty of runway for the White House and Congress to get a deal, in truth, there’s not very much time remaining. President Biden and Speaker McCarthy likely need to agree on a compromise package within the next 24 hours to avert a potential default.