Debt limit showdown looms aswhite House braces for a dividedwashington

President Joe Biden and Congress are facing a looming showdown with Republicans over raising the nation’s borrowing limit, alarming administration officials, Democrats in Congress and some investors who fear a stalemate that could roil financial markets at a precarious time for the global economy.

The fight could come to a head as soon as early next year, when the government is projected to hit its borrowing limit unless Congress can muster the votes to raise it. Republicans have opposed such increases vehemently and are threatening to block themoutright should they succeed in winning control of one or both chambers in next week’s midterm elections.

Top Republicans have suggested in recent weeks that theywould use any vote to avert a potentially calamitous default on the U. S. government’s debt to force Biden to accept deep cuts to federal spending that he has said hewill not support, potentially including reductions to Social Security and Medicare.

That could lead to a crisis similar to one that grippedwashington in 2011, when the nation came within days of defaulting on its debt as Republicans in Congress tried to force a Democratic president, Barack Obama, to accept large cuts in exchange for raising the legal borrowing limit.

Fearful of a repeat, a growing number of Democrats have urged party leaders to use a lame- duck session after the election to raise the debt limit substantially should Republicans win a majority, taking the issue off the table before the GOP assumes control.

The federal government could hit the debt ceiling in early 2023, although some estimates suggest it could happen later in the year; the Treasury Department can take “extraordinary measures” to continue payments for at least a few months. The cap governs howmuch the Treasury can borrow legally to finance its debt, based on spending that has occurred.

Democrats are discussing options for avoiding a politically and fiscally damaging logjam. They have floated legislation that would allow the administration to raise the debt ceiling unilaterally, rather than requiring a vote of Congress, or eliminate the cap altogether. Some have called for a measure that would raise the borrowing limit by an amount so large that it effectively-would punt the next debt fight until after the 2024 presidential election.

“Under normal circumstances, we’re not going to have to raise the debt ceiling until the fall or winter of 2023, and if Democrats can retain control over the House and the Senate, I think that’s what we’ll do,” Sen. Bernie Sanders of Vermont, chairman of the Senate Budget Committee, said.

Should Republicans take control of at least one chamber of Congress, however, acting in the lame- duck session would be “a wise course of action,” Sanders said.

“I think Democrats have got to be very, very strong in making it clear that Republicans cannot hold hostage the entire world economy in a desire to cut Social Security, Medicare andmedicaid,” he added.

Republican leaders have suggested they may try to do so.

Rep. Kevin Mccarthy of California, the minority leader in the lower chamber, has said he believes the debt ceiling should be raised, but lawmakers should reconsider current spending.

He said he would not “predetermine” whether Social Security and Medicare would be part of those discussions.

Sen. Mitch Mcconnell of Kentucky, theminority leader, has consistently said raising the debt limit is essential, but a spokesperson declined to comment before the midterms about whether he would seek conditions for any increase.

And Republicans are facing intense pressure from their right flank to force concessions, including from former President Donald Trump. On Thursday, Trump called for Mcconnell to face political retribution should he negotiate a deal over the debt ceiling with Democrats, which he has repeatedly done in the past. “Mitch McConnell keeps allowing it to happen — I mean, they ought to impeach Mitchmcconnell if he allows that,” Trump said, speaking on a conservative radio show. (Mcconnell, as a senator, cannot be impeached.)

Biden has used the Republican threats as a closing argument before the midterm elections, warning of economic damage if control of Congress changes hands.

“This is irresponsible,” he told a crowd in Florida this week. “Nothing, nothing, nothing will create more chaos and domore damage to the American economy than playing around with whether we pay our national bills.”

Federal law, prolific borrowing and congressional Republicans’ resistance to raising the debt limit have spurred an escalating series of fiscal showdowns since the 2008 financial crisis— with the exception of the first two years under Trump, when Republicans raised the limit without incident.

The federal government continues to spend far more money than it collects in tax revenues, even after the expiration of trillions of dollars in emergency pandemic assistance approved in 2020 and 2021. The Congressional Budget Office estimates that Washington will run annual deficits averaging $1.6 trillion over the next decade. That would bring the total debt held by the public to more than $40 trillion, about 110% of the projected annual size of the U.S. economy.

When the Treasury exhausts its authority to borrow more money, lawmakers will need to raise the debt limit or risk devastating consequences to financialmarkets that could ripple through the economy. Failing to lift the limit could force the Treasury Department to default on its obligations to bondholders, or to prioritize government payments in a manner that delays or threatens military salaries, Social Security benefits or basic federal services.

The impending departure of multiple centrist Republican lawmakers also has heightened fears of a standoff in early 2023. Only one House Republican, Rep. Adam Kinzinger of Illinois, who is retiring, ultimately voted to raise the debt limit in 2021.

“This is going to be a lame duck that’s not going to be for the fainthearted,” Sen. Ron Wyden of Oregon, leader of the Finance Committee, said. Conversations have begun about how to stave off the threat of cuts to crucial safety net programs or the economic catastrophe that would be unleashed if the U.S. defaulted on its debt, he said.

With seven weeks between Nov. 14, when lawmakers return after the midterms, and the start of the new Congress on Jan. 3, it is unclear whether Democrats canmuster the time or the political will to take up legislation addressing the debt limit.

Congress must pass an omnibus spending package to keep the government open after Dec. 16 and the annual defense policy bill.

That legislation could include more money for Ukraine in its war against Russia, after Mccarthy suggested a Republican majority would question future aid to Ukraine.