As the US government approaches the brink of default with no agreement yet reached to lift its borrowing limit, an unusual voice of reassurance has emerged. Mitch McConnell, the longstanding Republican senate leader from Kentucky, recently told reporters that people need to remain calm as “the country will not default”. This statement is surprising given McConnell’s infamous reputation as the “grim reaper”, and it seems incongruous against the backdrop of tensions surrounding Capitol Hill where partisan bickering continues to escalate. Indeed, House Republican negotiators, for instance, have accused their Democratic counterparts of being intransigent and claim that the sides remain far apart.
According to the Treasury Department, the US government may default on its debt as early as 1 June if Congress does not raise the borrowing limit. In this worst-case scenario, economists believe a market crash could occur, followed by a recession. Currently, President Joe Biden is working with Speaker Kevin McCarthy to find a solution. However, reaching a bipartisan agreement that can pass both the Republican-controlled House and Democratic-controlled Senate is proving difficult.
Despite all the histrionics regarding the debt-ceiling talks, McConnell is remaining optimistic about reaching a deal. As someone who has seen more than a few difficult negotiations during his nearly 40 years in the Senate, he believes the impasse is par for the course. Even though both Democrats and Republicans have drawn ‘red lines’, breakdowns and pauses have occurred, and the public feuding has escalated; such ‘deadline dances’ are not unusual in Washington and tend to end with a solution.
The delay itself may be seen as a good sign, as it allows for the theatrics to play out and ensures that partisans on both sides have fought as hard as they could before reaching a compromise. A quick-and-tidy agreement is likely to be viewed suspiciously by both parties’ hard-line factions, so any solution needs time to be worked out.
Looking at the differences between the parties, the gap between them surprisingly may not be that great. They are mainly debating whether to freeze government spending at the current levels or cut as much as $130 billion by reverting to 2022 spending, a sticking point for Democrats who object to exempting the Defense Department from any cuts. It is compromising over numbers, rather than fundamental philosophical differences – making agreement more manageable.
The recent blowups between parties have been timed to avoid causing undue panic, either intentionally or coincidentally. For example, the White House meetings between McCarthy and Biden have all taken place after the markets closed, and the biggest breakdown happened over a weekend before negotiations resumed on Monday.
Republicans have many reasons for not causing a stock-market crash, including potential losses to themselves and their constituents, and the recognition that a panic over the debt ceiling is not in their political interest and could undermine their negotiating position. Hence, McConnell’s statement that the country will not default is a sign that both parties want to prevent an economic disaster.
In summary, a debt-ceiling deal between Biden and McCarthy remains more likely than not, and it may only take a few more days of posturing and setbacks before it happens. McConnell’s reassurance that the country will not default is significant and suggests that Republicans understand the importance of reaching a compromise.
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