Analysis | We might as well stop calling debt limit measures ‘extraordinary’

On Thursday, the United States reached the legal limit of its ability to incur the debt necessary to pay its obligations. That’s a dry, boring articulation of what’s going on, but you were probably able to parse it pretty easily, given that you’ve read some variation so many times over the past few years. The country has a limit on how much debt it can accumulate, and when that limit is reached, the government of late has simply shrugged and either lifted the limit entirely for a while or collapsed in paroxysms of partisan hostility over how much it should increase. . .

Treasury Secretary Janet L. Yellen has assured lawmakers that the government can take extraordinary steps to pay its bills for at least a while, giving Congress a now-familiar window to figure out the shape of those paroxysms. But we might as well stop calling these measures “extraordinary” since they are now almost as normal as the debt limit itself.

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Before 2011, the debt limit increase process was proforma. The government would set a limit (as it has for over a century) and then increase its debt to pay the bills that Congress had approved. When the limit proved insufficient, Congress voted to increase it, and the process was repeated.

But then Democrat Barack Obama was elected president, and two years later, Republicans retook control of the House. Before long, the bargaining power of the debt limit became apparent: if a willingness to allow the United States to default by not allowing the government to accumulate more debt could be shown, concessions could be forced from the executive branch. . And so, with that amply demonstrated willingness, the debt limit became a common point of leverage.

From 2008 to 2010, the debt limit process worked as it had for a long time, increasing as needed to meet obligations. However, from 2011 to 2021, the country was almost always in one of two situations: on the edge and in “extraordinary measures” mode, or with the debt limit suspended or automatically adjusted to equalize the debt.

Almost the entire presidency of Donald Trump, for example, was in a period where the debt limit was suspended. From the day he took office to January 20, 2020, the debt increased 16 percent. During the last year of his presidency, spurred by the coronavirus pandemic, it rose another 20 percent.

Much of Joe Biden’s presidency has operated under more normal debt limit limits, as Democrats controlled the House and Senate. But now the limit has been raised again and the country is back to doing the ordinary “extraordinary measures” and the paroxysms are underway.

That this is happening now, with a Democratic president and a Republican House, is no coincidence. This has also been the pattern of late: That combination is more likely to spark a debt-limit fight. That’s partly because Republicans in Congress don’t want to threaten to bankrupt the economy when they also control the White House, and partly because Democrats in Congress haven’t created a credible impression that they would actually bankrupt the economy. This particular brinkmanship requires a combination of brash actors and sober respondents that seems to align with the partisan distribution in Washington we now see.

The change in the last 12 years is evident when we simply consider how long the country has been operating under special debt limit conditions. To the right of the graph below are the days each year that the country was operating with a debt limit that was not at risk of being immediately breached. On the left are the days when the system was not working normally.

In September, I pointed out that the debt limit at this point did not exist to restrict spending, as it doesn’t, but rather as a political stick. At the time, some Democrats were advocating a permanent suspension of the cap, acknowledging the likelihood that Republicans would soon retake control of the House. President Biden, however, rejected the idea.

You may soon wish you hadn’t.

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