Peter Orszag, the former head of the White House Office of Management and Budget and the Congressional Budget Office, warns in a Washington Post op-ed that the perils of debt-limit brinkmanship are greater than ever before.
Republicans have indicated that they will use the need to raise the debt limit sometime next year as leverage to force Democrats to accept spending cuts. Orszag warns that the danger of this tactic is heightened “because political norms that governed past negotiations — in particular, the idea that avoiding default is paramount — might no longer hold.”
In addition, he writes, the market for U.S. Treasurys has seen lower liquidity and greater volatility recently — and “what the Treasury market definitively does not need is heightened uncertainty over the debt ceiling. Jitters over lower liquidity in Treasurys make threats to the debt limit more dangerous than in the past.”
Orszag urges lawmakers to defuse the threat during the current lame-duck session of Congress, either in bipartisan fashion or through a Democrat-led reconciliation bill that would need only 50 votes to pass the Senate. The first approach seems far-fetched since Republicans are unlikely to cooperate in the numbers needed. Democrats have rejected the second approach, with some expressing concern that it would be too time-consuming given the many other items they have to address. The Biden administration reportedly anticipated that some Democrats (read: Sen. Joe Manchin of West Virginia) might not cooperate with a party-line plan, either.
Orszag urges congressional Democrats to reconsider: “Any Democrats averse to taking such a painful vote now should consider how much leverage their party will lose once Republicans control the House — and how much higher the risk of default will be then. It’s generally not a good idea to enter a negotiation with a ticking time bomb and a counterparty willing to let it go off.”
In a similar vein, Bloomberg columnist Jonathan Bernstein warns that Democrats are making a mistake by not addressing the debt limit before Republicans take control of the House. Republicans may get the blame, but Democrats won’t be able to avoid some blowback. “Whatever voters might claim they feel about who is responsible, if the economy tanks, Biden will take the blame,” he writes.