Untangling Debts, Deficits, and Deals

Congress must address four issues before it adjourns for the year’s end. Republicans and Democrats have substantive policy disagreements about each, but all four problems pose political challenges as well. The outcomes of all four debates have important implications for the American economy and President Joe Biden’s domestic legislative agenda. First, there are two things that Congress must do: raise the debt ceiling and fund the federal government.

The debt ceiling is a cap on the amount of money that the United States government may borrow. Because the federal government runs a deficit each year, it needs to borrow money to pay off the difference between its expenses and revenues. If the government does not borrow this money, it will be unable to pay its bills and will default on its loans, which economists predict would cause financial ruin.

The Treasury Department forecasted that the United States will reach its debt ceiling by mid-October. If Congress does not pass a bill before then to raise the debt ceiling, the government will default. Republicans have refused to help Democrats raise the debt ceiling, turning the issue into a political problem.

“Republicans’ position is simple,” wrote Senate Majority Leader Mitch McConnell in a letter to Biden, “We have no list of demands. For two and a half months, we have simply warned that since [the Democratic Party] wishes to govern alone, it must handle the debt limit alone as well.”

Congress also needs to fund the federal government. If Congress fails to pass a budget for fiscal year 2022, the federal government will shut down.

So far, Congress has only acted to defer both issues. On September 21, Congress passed a continuing resolution to maintain current levels of government funding through December 3. On October 8, the Senate passed a short-term extension of the debt ceiling that will prevent the government from defaulting until mid-December. The House is expected to vote on the bill on October 12.

While these measures have prevented an immediate shutdown and default, both issues have the potential to reappear before year’s end. Congress will need to work out full solutions to its funding and debt problems before the end of this session.

Second, there are two things that the Democratic majority in Congress wants to do: pass a 1.2 trillion dollar bipartisan infrastructure bill and pass a 3.5 trillion dollar reconciliation package.

The bipartisan infrastructure bill passed the Senate in mid-August with the support of 19 Republicans. It appropriates significant spending towards physical infrastructure, including 110 billion dollars for roads and bridges, and 65 billion dollars for expanded rural broadband access. The bill is a priority for the moderate wing of the Democratic party.

The reconciliation package, on the other hand, is important to more progressive Democrats. The budget reconciliation process is a legislative tactic that allows Congress to pass taxing and spending measures with only a simple majority, therefore avoiding potential Senate filibusters. The proposed bill contains 3.5 trillion dollars over 10 years to fund much of Biden’s domestic agenda, including 225 billion dollars for paid family and medical leave, and 450 billion dollars for childcare assistance, among other things.

The controversy over these two bills arose from a disagreement within the Democratic party. Moderates refuse to support the reconciliation package without first passing the infrastructure bill, while progressives refuse to support the infrastructure bill before the reconciliation package.

Additionally, moderate senators, such as Senator Joe Manchin, West Virginia Democrat, and Senator Kyrsten Sinema, Arizona Democrat, have expressed concerns about the reconciliation package’s price. In late September, Manchin announced that he would not support a 3.5 trillion dollar deal, instead proposing a bill closer to 1.5 trillion dollars.

“Respectfully,” wrote Manchin, “as I have said for months, I can’t support $3.5 trillion more spending when we have already spent $5.4 trillion since last March. At some point, all of us, regardless of party, must ask the simple question—how much is enough?”

Manchin’s hesitancy has caused frustration among progressive Democrats.

“What we’ve said from the beginning is it’s never been about the price tag,” said Representative Pramila Jayapal, Washington Democrat and chair of the House Progressive Caucus. “It’s about what we want to deliver—the price tag comes out at that. The critical thing is, let’s get our priorities in and then we’ll figure out what it actually costs.”

Responding to  Manchin’s proposal for a 1.5 trillion dollar reconciliation deal, Jayapal also said, “Well, that’s not going to happen. Because that’s too small to get our priorities in. So, it’s going to be somewhere between 1.5 and 3.5 trillion dollars.”

Going forward, Democrats must reconcile these differences if they hope to enact any of Biden’s legislative agenda. Congress’s success or failure in passing these bills has important implications for the 2022 midterm elections and the future of Biden’s administration.

Thomas Richter is a junior at Notre Dame from Columbus, Ohio, double majoring in political science and philosophy. He is spending the fall semester 2021 studying in Washington D.C. He can be reached at trichter@nd.edu.

Photo credit: Senator Joe Manchin, by Third Way, licensed under Creative Commons BY-NC-ND 2.0 License