To keep the debt limit off the table until after the 2024 presidential election would likely take the biggest single debt limit hike ever, according to forecasts by the nonpartisan Congressional Budget Office and the White House’s own Office of Management and Budget.
While the focus has been on whether the meetings between President Joe Biden and congressional leaders will keep the government from defaulting as soon as early June, there’s been little public discussion of how big a hike will be needed to not run that risk before November 2024 ― potentially thrusting the already fraught debt limit debate into the heat of presidential and Congressional campaigns.
Time is ticking.
Treasury Secretary Janet Yellen has warned the government could run out of money to pay its bills as early as June 1. But instead of having the second meeting between Biden and congressional leaders on Friday as planned, the meeting’s postponement was announced Thursday.
“Staff will continue working and all the principals agreed to meet early next week,” a White House spokesperson said.
“One of the leaders couldn’t be there. They have a funeral they have to attend. They didn’t think it would be productive. So we thought, let’s do next week,” House Speaker Kevin McCarthy (R-Calif.) told reporters.
Earlier in the day, Rep. Hakeem Jeffries (D-N.Y.), the House Democratic leader, said staff-level meetings had happened Wednesday and were “very productive.”
House Republicans insist Biden must agree to spending cuts before they will allow the limit on government borrowing to be hiked. The White House said it won’t negotiate over the debt limit but is willing to talk about the budget separately. How those seemingly incompatible stances have been dealt with in the nascent talks is unclear.
One open question is how long a deal should keep the debt limit from coming up again. The House GOP passed a bill giving the Treasury another $1.5 trillion or until March 31, 2024, whichever came first, if the administration accepted nearly $5 trillion in spending cuts.
But the White House likely wants to put the issue on ice until after the 2024 elections ― a view advocated by a former senior budget official.
“We do not want to deal with this again in the spring of 2024. That would be really problematic,” Peter Orszag, a former director of the Congressional Budget Office and Barack Obama’s White House budget director, said recently on CNBC.
“We do not want to deal with this again in the spring of 2024. That would be really problematic.”
– Peter Orszag, former director of the Congressional Budget Office
Orszag said the debt limit should have been dealt with during the post-election “lame duck” meetings of Congress, when Democrats could have passed a hike without any GOP votes.
“One of the biggest mistakes we can make here is to extend it only for a year because we do not want to be dealing with this again in election year.”
But according to CBO and OMB forecasts released earlier this year, it would take significantly more than $1.5 trillion in the House GOP bill to get through November 2024.
The current debt ceiling is $31.38 trillion, of which the Treasury has used all but about $25 million. In January, the CBO projected the debt would be at $34.32 trillion as of Sept. 30, 2024, only about five weeks before the presidential election. That’s a difference of $2.9 trillion.
In March, the White House Office of Management and Budget released its own forecast, which put the debt at $34.84 trillion on Sept 30, 2024. That would mean an even larger increase would be needed than under the CBO projection, $3.5 trillion.
“We could very well get two bites at the apple.”
– Rep. Tim Burchett (R-Tenn.)
The largest nominal debt ceiling hike so far has been the one in 2021, a $2.5 trillion boost. Before that, the biggest one was in 2011, the last time a GOP House squared off against a Democratic White House over the debt limit. That boost, in three phases, was $2.1 trillion.
The Treasury could get by with slightly smaller increases than the forecasts call for, because it would be able to take accounting steps to give it possibly several more months of breathing room, depending on the calendar, or if the revenues or spending come in differently and close the deficit slightly.
Also, the sheer size of deficits now in nominal terms means bigger hikes provide borrowing room for shorter amounts of time now than in the past.
Still, getting enough of an increase to last through 2024 could either mean Republicans up their demands from the current offer, which Jeffries has called “a ransom note,” or Republicans agree to some of what’s needed now and ask for more later, as expected in the House-passed bill.
“We could very well get two bites at the apple,” Rep. Tim Burchett (R-Tenn.) told HuffPost. “I don’t see the president as being very good at doing anything right now, as far as negotiating or otherwise. I think he’s a little bit rattled.”
Rep. Patrick McHenry (R-N.C.) chairman of the House Financial Services Committee, said Democrats need to put forward a plan.
“There are no red lines here. What we need to hear is a viable response,” he said.
McHenry also took aim at Biden for contemplating relying on the 14th Amendment, which says the validity of the public debt is unquestionable as a legal defense against default. Biden after the meeting Tuesday said, “There have been discussions about whether or not the 14th Amendment can be invoked.”
“I think it’s a terrible idea for the president to suggest that,” he said. “We don’t need brinksmanship. It’s not in our economic interest for a myriad of reasons.”
One possible way to ease the political lift would be to again suspend the debt limit until a certain date, as was done several times between 2011 and 2021.
That would allow lawmakers to say they didn’t vote for a debt hike boost per se, but it also would mean a suspension would leave them responsible for an unknown amount of debt run up during the period the debt limit was turned off.
For example, the last suspension under Donald Trump saw $6.41 trillion in debt added, far larger than any resulting debt from a simple straight debt limit hike.