The United States slipped one step closer toward an unprecedented default on its national debt — with unknown global economic ramifications — when Indiana’s Republican U.S. senators pledged Monday to oppose a “clean” debt limit increase.
Todd Young and Mike Braun were among 43 Senate Republicans promising to block a vote on any proposal to increase the debt limit, unless the measure includes spending cuts and structural budget reform “as a starting point” for negotiations.
“Our economy is in free fall due to unsustainable fiscal policies. This trajectory must be addressed with fiscal reforms,” they said in a letter to Senate Majority Leader Chuck Schumer, D-N.Y.
Senate rules generally require 60 lawmakers in the 100-member chamber to agree to proceed to a final vote on legislation, which then only requires 51 “ayes” to pass.
If the 43 Republicans stick together, they likely can prevent any proposal that doesn’t meet their expectations from getting to a final vote — making a U.S. debt default much more likely to occur.
The United States technically exceeded its $31.381 trillion statutory debt limit in mid-January. The Treasury Department has since resorted to extraordinary measures to keep the nation’s debt under that total, although such steps no longer will be possible beginning around June 1, Treasury Secretary Janet Yellen said.
Raising the debt limit does not authorize any new spending. It merely increases the total amount of money the federal government is authorized to borrow to meet its legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds and other payments.
Democratic President Joe Biden has called on Congress to approve a “clean” debt limit measure that simply increases the limit without risking the possibility of global financial collapse if the U.S. defaults on its debt for the first time in its history.
“Take default off the table, and let’s have a real, serious, detailed conversation about how to grow the economy, lower costs and reduce the deficit,” Biden said last month.
But the Republican-controlled House, including all seven GOP representatives from Indiana, is insisting that Biden agree to across-the-board spending cuts, mandatory work requirements for public assistance programs, and repealing energy-efficiency laws, among other demands, in exchange for a one-year debt limit increase — setting up another potential crisis in the middle of the 2024 presidential campaign.
Young and Braun believe House Republicans have the right idea, they said in the letter to Schumer.
“The House has taken a responsible first step in coming to the table with their proposals. It is imperative that the president now do the same,” they said. “As such, we will not be voting for cloture on any bill that raises the debt ceiling without substantive spending and budget reforms.”
If the stalemate continues, the Biden administration could try to avoid default by seeking to have the debt limit declared unconstitutional, or it may take advantage of a weird loophole in federal law allowing platinum coins to be minted in any denomination and order the creation of one or more trillion-dollar coins to cover previously approved government spending in place of new debt.
However, Yellen advised that the best course of action is for Congress to simply raise the debt limit as quickly as possible and avoid the worldwide financial calamity that would accompany a U.S. debt default.
“We have learned from past debt-limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States,” Yellen said.
“If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests.”
Treasury records show that Congress has acted 78 times since 1960 to permanently raise, temporarily extend or revise the definition of the debt limit — 49 times under Republican presidents and 29 times under Democratic presidents.