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House Democrats Try to Ease Threat of Battle Over Debt Ceiling

House Democratic leaders have long argued debt ceiling shouldn’t be used to extract policy concessions from the opposing party.

House Democrats Try to Ease Threat of Battle Over Debt Ceiling
Nancy Pelosi speaks to members of the media in the U.S. Capitol in Washington on Jan. 2, 2019. (Photographer: Andrew Harrer/Bloomberg)

(Bloomberg) -- House Democrats are moving to make good on Nancy Pelosi’s promise not to use the nation’s debt ceiling as a political weapon to avoid jeopardizing the U.S. credit rating.

As they take power Thursday and elevate Pelosi to speaker, Democrats plan to pass a rule stating that if the House adopts a budget plan for the next fiscal year, the debt ceiling would automatically be increased. But that would eliminate only one hurdle to raising the debt limit -- the GOP-controlled Senate and President Donald Trump also would have to agree.

House Democratic leaders have long argued the debt ceiling shouldn’t be used to extract policy concessions from the opposing party. During the 2013 debt ceiling battle between House Republicans and then-President Barack Obama, Pelosi said she wouldn’t use the debt ceiling to try to force policy concessions from Republicans if she ever gained the majority again.

“I would be willing to say don’t mess with the debt limit,” Pelosi of California said in September 2013. “That is a luxury we can’t afford.” She was speaker of the House from 2007 to 2011 and has been minority leader since then.

The debt limit is currently suspended but will snap back into effect March 1 at about $22 trillion, according to an estimate by the nonpartisan Committee for a Responsible Federal Budget, a watchdog group. The Treasury Department likely can use so-called extraordinary measures to delay hitting the limit until mid-year. But eventually lawmakers must find a way to prevent a default on government obligations.

The current standoff over money that Trump is demanding for a border wall, which has resulted in a partial government shutdown now in its 12th day, has raised concerns on Wall Street about a potential showdown over the nation’s debt limit that could disrupt markets.

Trump, Senate

Budget expert Bill Hoagland of the Bipartisan Policy Center said the House rule would "absolutely not" take all the drama out of the next debt ceiling increase. Trump or Senate Republicans could still try to use it to extract concessions from Democrats.

"That bill still has to be acted upon by the Senate," said Hoagland, a former Senate Republican Budget Committee staff director. He said that the Senate "is very likely to send the bill back to the House for reconsideration."

Molly Reynolds, a fellow at the Brookings Institution, said being able to raise the debt limit without a separate vote in the House "makes it slightly more politically palatable for those members who are worried about those politics."

‘Biggest Threat’

She said she also thinks Senate Majority Leader Mitch McConnell is likely to have enough votes to raise the debt limit, "leaving the biggest threat as President Trump."

The House had a similar rule for 31 years until House Republicans repealed it in 2011, ahead of that year’s crisis in which House Republicans tried to force Obama to accept spending cuts in exchange for raising the debt ceiling. According to the nonpartisan Congressional Research Service, the House used the rule 20 times to pass a debt ceiling boost, resulting in 15 increases enacted into law.

Reinstating that rule may have little effect in this year’s debt limit debate, but "it could very well make future debt limit increases easier and smoother," said Marc Goldwein, a budget expert at the Committee for a Responsible Federal Budget.

The new rule "very clearly passes the debt limit hot potato to McConnell and the Senate. Whether the Senate chooses to do something with it is on them," said Zach Moller, a former Senate Budget Committee aide.

--With assistance from Sahil Kapur.

To contact the reporter on this story: Erik Wasson in Washington at ewasson@bloomberg.net

To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Laurie Asséo

©2019 Bloomberg L.P.