Debt Ceiling to Dominate First Session of 118th Congress
The 118th Congress continues to organize – House Republicans will meet today to formally approve committee assignments and House Democrats will also complete the process this week. The Senate is progressing toward their committee ratios and committee assignments. Committees will begin filling out subcommittee assignments and planning for hearings. Both parties and both legislative bodies want to make progress on important issues such as China, big tech, fentanyl, inflation, crypto, agriculture, the war in Ukraine, energy, and climate, etc.
One issue, however, will dominate the first session of the 118th Congress: The debt ceiling. The constitution gives Congress the power to borrow money on the credit of the United States. Congress, by law sets the amount the federal government is allowed to borrow. In December of 2021, Congress raised the total amount the federal government was allowed to borrow to $31.4 trillion. On January 19th, Treasury Secretary Yellen informed Congress that the federal government had reached the limit – we’ve borrowed $31.4 trillion. If Congress does not authorize incurring additional debt, the only money Congress can spend is the money it takes in from taxes, tariffs, and user fees. With spending currently exceeding revenues by over $1 trillion annually, the federal government won’t be able to even pay interest on the debt before long – meaning the federal government is at risk of defaulting on its debt if Congress does not act to raise the government’s borrowing authority.
According to S&P Global Ratings, “Congress has raised the debt ceiling on time on over 80 occasions since 1960. This has occurred during both Republican and Democratic Congresses/administrations. Many of the debt ceiling changes have been agreed on in conjunction with major fiscal legislation used as a negotiation tool. During the last 12 years, Congress has passed legislation (and the president has signed it) to raise or suspend the debt ceiling on seven occasions (in 2011, 2013, 2017, 2018, 2019, and twice in 2021) following an impasse on the debt limit.”
This year, raising e debt limit appears to be more difficult than many other debt limit debates. Republicans won the House of Representatives by a narrow margin. Divided government has returned. Bipartisan cooperation is required to get anything done. The new Republican majority wants spending limitations as part of an agreement to raise the debt limit. This is not unprecedented – both parties have used the debt limit in the past to enact fiscal reforms. Democrats – including and especially President Biden – have said this year Congress should pass a “clean” debt limit. They want the borrowing limit raised on its own and have said they will not negotiate any spending deal as part of the debt ceiling process. On the surface, it appears that the two sides have conflicting demands.
It is January and Secretary Yellen has informed Congress that the Treasury Department can keep paying its bills until at least June by using “extraordinary measures.” Many analysts believe the date could be as late as July or August, depending on monthly revenues and expenditures. But the bottom line is Republicans and Democrats have six to 8 months to reach an agreement on how to fulfill a basic governing requirement – authorizing the level of debt the federal government is authorized to incur. It is the basic function that will dominate the legislative agenda in 2023.
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