Despite High-Level Guarantees, Time Is Running Out to Avoid a Default

Senator Mitch McConnell had a message for Americans who are increasingly worried that the economy will collapse if the federal debt ceiling is not raised: Just chill.

“Look, I think everybody needs to relax,” Mr. McConnell, the Kentucky Republican and minority leader with deep experience in the debt ceiling showdown, told reporters back home earlier this week. told. “Regardless of what may be said about the day-to-day negotiations, the president and the speaker will reach an agreement. It will ultimately pass on a bipartisan vote in both the House and Senate. The country will not default. will do.”

This may be easier said than done. While Mr. McConnell, President Biden and Speaker Kevin McCarthy have repeatedly assured Americans that there will be no default, that guarantee is looking a little shaky given that more than a week will pass before the U.S. Treasury. Cash is likely to run out. To meet your obligations.

Even if negotiators agree to a deal soon — an outcome that appeared within reach but still not in place as talks continued Friday — much remains to be done, including At least it has to get approval in the House and Senate. This conclusion is nowhere in the face of growing anxiety and some outright opposition on both the right and the left. At this point, no one can be absolutely sure that the United States won’t fall off the cliff by default, even if no one involved wants that to happen. Time is short.

“Nobody can guarantee that there won’t be a default, if for no other reason than the clock is ticking here,” said G. William Hoagland, a longtime Republican budget guru on Capitol Hill. who is now senior vice president. In Bipartisan Policy Center. “We’re largely on thin ice.”

Negotiators got some breathing room on Friday afternoon with the announcement by the finance secretary that the default deadline had been moved four days later, to June 5. But Congress will be hard-pressed to act by then, and even a short extension could prove counterproductive, causing some damage. The urgency to seal the deal.

“We’re in the window of being able to get this done, and we’re going to have to come to some really tough terms in these closing hours,” said Patrick T. McHenry, Republican of North Carolina and a key negotiator for Mr. McCarthy. “We’re going back to the final, important issues, and that’s not resolved yet.”

Since the start of the impasse, Mr. Biden and congressional leaders have tried to downplay concerns that a default would occur, mainly by saying it was unthinkable because Congress had passed much longer than originally scheduled. What is less avoided? After one of the high-level meetings at the White House, Senator Chuck Schumer, Democrat of New York and Majority Leader, cheered the fact that all four leaders said default was off the table.

Part of his motivation in offering these continued assurances was to bolster his own forces, to calm the public and prevent financial markets from deteriorating as negotiations continued.

But President Biden changed his tune slightly during his visit to Japan last weekend, saying for the first time that default was an option if Republicans insisted on pushing the issue forward.

“I can’t guarantee that they won’t do something outrageous to force a default,” Mr. Biden told reporters. “I can’t guarantee that.”

Representative Hakeem Jeffries, Democrat and Minority Leader of New York; expressed similar sentiments This week he was asked if he still believed the government would not default.

“Not with this group,” he said, referring to Republicans, some of whom are skeptical of the financial consequences of a default if they think it might help them politically in 2024. There will be no objection to chaos.

Mr McCarthy, the House leader and a California Republican, has also repeatedly said there will be no default and stressed on Friday that he believed there would be a positive outcome.

“I am completely optimistic,” he told reporters as talks continued with no clear breakthrough.

Mr. McCarthy has said that one way to avoid default is for the Senate to pass and the president to sign a measure that Republicans passed in the House raising the debt ceiling while making deep budget cuts and The Biden administration had rolled back other measures. But this is unlikely to happen even if the treasury runs out of money. Mr McCarthy has also ruled out an emergency short-term suspension of the debt ceiling.

Even a deal between House Republicans and Mr. Biden will not end the drama. In some cases, this will be just the beginning.

House Republicans have a 72-hour rule between when legislation is made public and when it must be voted on, a timeline that pushes the showdown closer to the Treasury’s early June deadline. .

Also, with hard-right elements of the Republican conference joining progressive Democrats in voicing concerns about the deal’s shape, Mr. McCarthy and Mr. Jeffries need both sides to get the deal approved. The needle may need to be tapped to get a vote. .

Mr. McCarthy and his leadership team will have to accurately gauge the number of Republicans committed to voting for any final budget deal with an increase in the debt ceiling. Then they will need to tell Mr. Jeffries how many votes Democrats need to ensure that at least 218 lawmakers will support the package.

A miscalculation can mean disaster. In September 2008, with the nation in deep financial crisis, the House stunned the Bush administration by failing to pass its bank bailout program. In a chaotic turn of events on the House floor, the measure failed as many Republicans refused to support it despite the president’s pleas and few Democrats supported it. The stock market fell in real time as the vote unfolded. Four days later, the tumultuous members of the House returned and approved the proposal with a few changes.

Some believe a similar scenario may be needed to push a debt ceiling plan through Congress — a failed vote and a market slump that underscores the economic consequences of default and forces lawmakers to Encourages action. Others would prefer not to incur even a brief default given the potentially severe consequences.

“I’m optimistic that it won’t happen, but the longer it goes on, the more likely I think it is,” budget expert Mr. Hoagland said. “The time to do this is over, but I’m just praying there’s no default.”

Luke Broadwater Cooperation reporting.