Even as President Biden and congressional leaders plan to meet next week to discuss the debt limit, the path out of the current stalemate remains unclear. If this is a high-stakes game of chicken, no one is swerving yet — and neither side may budge until the default deadline draws near, bringing with it the risk of economic calamity.
So how might this all play out? Before Biden issued his invitations, Sahil Kapur of NBC News laid out a few possibilities, murky as they may be.
1. Biden and McCarthy negotiate. The White House still says it won’t negotiate on the debt limit, but many in the media aren’t buying it, arguing it’s not a sustainable position. Even if the two sides can hammer out some sort of agreement, the path to passage would likely require votes from Democrats and some moderate Republicans in the House. A solution won’t be easy to reach or pass given the entrenched positions of both parties and the political risks involved, most notably to McCarthy, who could lose his job if hardline Republicans revolt at the notion of compromise.
Analysts at Goldman Sachs said in a note to clients early Monday that they see a deal happening. “Our base case for resolution of the debt limit is that Congress will raise it on the day of the deadline, plus or minus one day. There is clearly a chance that Congress fails to raise the debt limit by the deadline and some payments are delayed, but if this occurs we would expect a lapse to be brief given the potential political consequences of a longer standoff,” economists Alec Phillips and Tim Krupa wrote. “Ultimately, we expect the debt limit to be resolved through a deal that pushes the next debt limit deadline into 2025 and caps discretionary spending. However, the spending restraint from these caps would likely be more modest than the recent House-passed bill.”
2. Congress passes a clean increase. “GOP senators are doubling down on the push for Biden to negotiate with McCarthy rather than acceding to a clean debt ceiling bill,” Kapur writes. If Biden sticks to his position, some Republicans might start getting antsy, or deadline pressure might force lawmakers to consider a short-term extension, which brings us to...
3. Tie debt limit to government funding: “Some congressional aides believe the way out is to attach a debt limit extension to a bipartisan government funding bill, which is due by Sept. 30 to prevent a shutdown,” Kapur says, adding that the calendar and budgetary considerations could present problems for this scenario. "It may be prudent to pass a short-term debt limit increase to put more time on the clock, show good faith and sync the deadline up with that of government funding,” Republican strategist Liam Donovan tells Kapur. “Short of that sort of orderly engagement, it will take coming right up to the edge to determine who blinks."
