The debt ceiling battle of 2023 was full of sound and fury, and signified ... well, not nothing, exactly, but not very much.
Despite heated rhetoric over hostage-taking and talk of default, President Joe Biden and House Speaker Kevin McCarthy arrived at a relatively normal budget deal reached with the help of an imminent deadline.
The deal passed the House in an overwhelming bipartisan vote Wednesday night, and the Senate by a vote of 63 to 36 Thursday night.
Neither party got everything it wanted. Domestic spending will effectively be held at something close to the status quo in nominal terms, which means a cut when accounting for inflation. It’s still at a much higher level than Republicans wanted, and lower than Democrats would have preferred (though they do not see the cuts as devastating).
On a set of other policy issues where Republicans made big demands, Democrats granted only some limited concessions — for instance, on work requirements for some food stamp recipients, and on agreeing to restart student loan repayments in August, the latter of which the Biden administration had already said they’d do.
The biggest political losers from this anticlimactic outcome of bipartisan feel-goodery include those whose theories of congressional politics tend toward the confrontational — both the conservatives hoping to use a crisis to force drastic policy changes, and liberals who hoped Biden would take bold executive action to effectively solve the debt ceiling issue. Yet those who actually wanted major policy changes to shrink the federal deficit and reduce the growth of the national debt should also be discomfited at this deal, which shows that the budget status quo remains popular in Washington.
Winner: Joe Biden
Biden’s handling of the debt ceiling issue has been repeatedly second-guessed in recent weeks. Initially, he claimed he wouldn’t negotiate on the topic at all, but he also essentially ruled out using his own executive authority to avert a default — hoping Republicans would simply cave.
But as the crisis date drew nearer with no sign of a GOP cave, Biden had the good sense to realize his initial plan wasn’t working. Furthermore, he knew there was no scenario in which he would have avoided negotiating with Republicans on this year’s spending levels — eventually, the House needed to pass bills funding the government.
Biden would have preferred to have those talks without the debt ceiling hanging over his head. But he eventually climbed down and agreed to talk to the GOP, hoping a reasonable deal could be struck.
And at the end of the day, that’s what he ended up with. Biden did not defeat Republicans, nor was he strong-armed by them into making horrendous concessions. Rather, the two sides compromised. Biden averted an economic crisis without making extraordinary policy changes, and took the debt ceiling issue off the table until after the 2024 election — overall, a pretty good outcome for the sitting president.
Loser: Liberal commentators who wanted a partisan showdown to end debt ceiling hostage-taking
Some Democrats have long resented how the 2011 debt ceiling crisis played out. In that episode, President Obama agreed to deep spending cuts to avert House Republicans’ threat of a debt default — an outcome that they viewed as basically rewarding terrorist tactics. The experience led many to hold the view that should another such crisis come around for a Democratic president, they should hold firm and refuse to negotiate.
Meanwhile, some wonks, academics, and commentators proposed various clever-sounding workarounds through which, they argue, the administration could effectively defuse the debt ceiling bomb without Congress at all. Perhaps the administration could cite the 14th Amendment in arguing the debt ceiling is unconstitutional, or they could issue a novel sort of debt, or they could mint a platinum coin worth $1 trillion.
This year’s crisis had the potential to be the big moment for one of these ideas. But the problem was that the Biden administration never believed any of those weird tricks could truly be relied on to avert an economic crisis rather than causing it. They saw legal, practical, and political problems with all of these options. And once they were ruled out, he didn’t really have any better way out of the crisis than negotiating.
Which worked out just fine, it turned out. The fact that House Republicans agreed to a relatively reasonable deal rather than insisting on extreme concessions undercuts these commentators’ analysis that a highly risky game of chicken or executive authority option was even necessary here. If Biden followed their advice, the outcome — for the nation’s economy, and his presidency — could well have been much messier.
Winner: Kevin McCarthy
When McCarthy was set to take over the speakership, many in Washington openly questioned whether he had the chops for the job, with some openly calling him “dumb.” His struggles at locking down the Republican votes to even become speaker also seemed to portend an ineffective tenure.
Yet all in all, McCarthy’s handling of the debt ceiling issue was pretty impressive. Initially, he kept the party together, passed a GOP-only proposal through the House, and tried to drive a tough bargain with Biden. Rather than fragmented and chaotic, his conference was unified in maintaining they would not accept a clean debt ceiling increase, and that Biden must negotiate with them.
Then, when the time came, he was willing to reach a pragmatic deal that the hard right of his party would hate but that would win support from a majority of House Republicans. He proved that, in fact, the far-right House Freedom Caucus does not control his speakership. And he even kept Trump’s opposition relatively muted, in part by being sure to keep him informed about developments through frequent phone calls.
Loser: The House Freedom Caucus
The ideologically extreme, confrontational House Freedom Caucus (HFC) has bedeviled Republican speakers going back to John Boehner in 2015 — their truculence helped lead to his decision to resign that year.
And the odd dynamics of the speaker election, in which McCarthy needed to lock down 218 votes among his 222 Republicans to get the job, made it seem to some as if the HFC would effectively be running the show this Congress. McCarthy had even granted them key spots on the Rules Committee, and changed the rules so that any one member of Congress can effectively force a grueling new speaker election via the “motion to vacate the chair,” which many feared would be a sword of Damocles hanging over his head for the rest of his speakership.
McCarthy played nice with the Freedom Caucus throughout the negotiating process, but when the time came, he made his deal without being scared of a far-right coup. Indeed, HFC members squawked and complained on Fox News, but they seemed reluctant to go so far as trying to push McCarthy out.
When reluctant Freedom Caucus members withheld their floor votes for the rule that would allow the deal to come to a full House vote, Democrats ended up bailing McCarthy out. An Axios report claimed Minority Leader Hakeem Jeffries had made a secret deal with McCarthy in exchange for more earmark money for Democratic districts, though McCarthy’s and Jeffries’s offices heatedly denied any such deal.
Regardless, the implication is clear: The Freedom Caucus’s recalcitrance risks pushing policy further to the left. If they care about policy rather than simply maintaining an oppositional posture, they’d be wise to reflect on that. (But it’s not clear that’s what they do care about.)
Winner: Medicare, Medicaid, and Social Security beneficiaries
The debt ceiling deal cements the bipartisan consensus that Medicare and Social Security should not be touched to reduce the deficit. This is a major shift in the GOP, which tried to privatize Social Security under George W. Bush in 2005 and backed Rep. Paul Ryan’s plan to privatize Medicare in 2011.
But Donald Trump’s opposition to such cuts (as well as the GOP’s increased reliance on older voters and less wealthy white voters) took changes to those programs off the table.
There was some speculation that Republicans could return to such ideas as part of debt ceiling talks — yet, as seen during a live back-and-forth with Biden on the topic during his State of the Union address in February, their ardor for entitlement reform affecting seniors has waned. The resulting debt ceiling deal only affirmed that.
The GOP did propose effective major cuts to Medicaid, by way of work requirements for beneficiaries. But Democrats held strong against that idea and the GOP gave in, dropping it from their demands. Medicare, Medicaid, and Social Security are safe (for now).
Loser: Non-working food stamp recipients aged 50 to 54
The Supplemental Nutrition Assistance Program — popularly known as food stamps — was a target of Republicans during negotiations. But the actual outcome was a little more nuanced.
One significant concession Biden did make to Republicans involved work requirements for food stamp beneficiaries. These requirements already existed for recipients aged 18 to 49, but the deal expands them to recipients aged 50 to 54 (those with physical or mental disabilities affecting their ability to work are exempted). Progressives typically dislike work requirements and question whether they in fact successfully incentivize more people to get jobs, or whether they’re simply another administrative and paperwork burden that ends up depriving deserving people of benefits.
Now, Biden did win a significant concession in return — food stamp recipients of any age who are homeless or veterans will be exempted from preexisting or new work requirements, as will young adults who recently exited foster care.
A Congressional Budget Office analysis of the bill estimated that the net effect of the food stamp provisions would be to increase the number of beneficiaries. But other analysts question whether that will happen in practice given the difficulty of getting homeless people signed up for benefits.
Loser: Student loan borrowers hoping payments wouldn’t restart
In March 2020, as the Covid-19 crisis was breaking out, the Trump administration paused payments and interest accumulation on most federal student loans. The Biden administration has repeatedly extended those pauses even as the nation has returned to normal — in part, because student debt forgiveness has become an important policy demand from progressives.
But the debt ceiling deal says that loan recipients will need to begin payments and interest accumulation will start again by the end of August. The Biden administration had already said they planned on restarting payments then, but given that they’d extended the payment pause so many times in the past, Republicans doubted whether they’d follow through. But, if signed into law, the deal guarantees that those payments would indeed have to restart.
As for Biden’s larger student debt forgiveness plan — which promised to cancel up to $20,000 in debt for low-income students and $10,000 for many others — its fate still hinges on the Supreme Court, with a decision expected to come down this month.
Winner: Joe Manchin
Last year, he sought to overhaul federal permitting for energy projects, and he wanted Congress to jump-start one specific natural gas project currently stalled by permitting woes — the Mountain Valley Pipeline.
Now, some Democrats had also hoped for a deal that would ease permitting requirements for clean-energy projects as well, to help the fight against climate change. But talks on those issues fell apart last year, in part because progressives objected for environmental reasons, in part because Republicans were just reluctant to hand Manchin a win.
Yet lo and behold, when the debt ceiling deal was released, it included the approval of Manchin’s pipeline as a treat. The Biden administration had granted an important permit for the pipeline two weeks prior, but the deal orders expedited approval of other permits and effectively protects the pipeline from lawsuits. The deal also included some limited changes on permitting reform, particularly to the National Environmental Policy Act, that had been sought by Manchin and Republicans.
The problem is that now that Manchin and the GOP have gotten some of what they wanted, it could reduce the urgency for broader permitting reform sought by clean energy backers, as Heatmap’s Robinson Meyer writes. But Manchin has, once again, gotten his way.
Loser: Serious deficit hawks
In theory, this debt ceiling battle was about Republicans’ desire to reduce the long-run federal budget deficit. In practice, it was nothing of the kind.
The key cost drivers of the federal budget — Social Security, Medicare, Medicaid, and defense spending — were left untouched (or, in the case of defense spending, increased). The GOP remains uniformly opposed to tax increases, which also weren’t included. And Republicans didn’t want to cut spending on veterans either.
So negotiations largely focused on what should happen to the single category of “non-defense, non-veterans discretionary” spending. But for cuts to that category to make a sizable real long-run impact, they’d have to be gargantuan. Democrats would obviously not go for that, and even most Republicans don’t actually seem to have wanted much bigger cuts (the party wants to be seen as cutting spending but is far less united on what specifically they’d want to cut).
Washington’s deficit hawks are nonetheless declaring victory, as any spending cuts do move things in the right direction from their perspective. That’s fair enough. But in a sense, the outcome of these talks reveal just how little political consensus there still is around their project.
Winner: The debt ceiling
The debt ceiling is terrible policy — governance by game of chicken with the risk of national default is an awful way to run a country.
And yet it’s probably here to stay.
Republicans obviously will want to keep it around, since they successfully used it to win at least some concessions from Biden. While there’s lately been some regret from Democrats that they didn’t abolish the debt ceiling while they had the chance — though in reality they never actually had the chance, since Manchin would have opposed doing so — the relatively quiet outcome from this go-round will probably reduce that urgency.
Next time Republicans control Washington, Democrats will again see the usefulness of the debt ceiling in spurring dealmaking, as Chuck Schumer did in 2017 under President Trump. Next time Democrats have unified control of Washington, they’ll still have moderates who fear that a vote to ditch the debt ceiling will be a campaign liability.
To actually get rid of the debt ceiling, we’d probably need a crisis that’s much worse than this year’s actually turned out to be. In the absence of such a crisis, politicians will view it as an annoying thing they both have to deal with and can deal with. They did so again this time — and so they kick the can down the road for the next administration.