How the Washington establishment is confounding Biden's debt ceiling plan
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As President Biden worked last year to secure passage of his economic proposals, his aides pointed to analyses by the Committee for a Responsible Federal Budget, a nonpartisan group routinely cited by lawmakers of both parties on fiscal matters.
But this year, when the White House and House Speaker Kevin McCarthy (R-Calif.) dug in for a protracted stalemate over the U.S. debt limit, the nonpartisan committee released a statement in April praising House Republicans' bill on the issue as a "realistic and extremely welcome first step" in talks. Administration officials were stunned by the announcement, which they thought encouraged what they consider McCarthy's reckless brinkmanship over the nation's credit, according to three people who spoke on the condition of anonymity to describe the private reaction inside the White House.
"We were livid," one of the people said.
The frustration among Biden's aides reflects a pivotal dynamic in the debt limit fight that could prove crucial to whether the United States avoids a catastrophic default. The Republicans, who control the House, are demanding billions of dollars in spending cuts from next year's budget in exchange for raising the debt ceiling, the legal cap on how much the government can borrow to pay its existing bills. Biden has refused on principle, arguing that the debt limit must be raised no matter what, while saying he's open to a separate discussion on the budget and spending.
Biden officials had hoped they could win in part with the backing of powerful Washington allies outside the government - including establishment Republicans, the business lobby and nonpartisan budget hawks - that have traditionally warned against default.
At least so far, however, these key constituencies have not rallied to the White House's side, instead urging an agreement - any agreement, in some cases - to get the debt ceiling raised before the government runs out of maneuvering room to head off a crisis.
Rather than join Biden in urging the GOP to simply raise the borrowing limit - as many administration officials had hoped - these groups have called for bipartisan budget negotiations, implicitly endorsing McCarthy's position and rejecting Biden's opposition to talks. Calls for Biden to negotiate have only grown louder since the House successfully approved a Republican bill in April to cut spending and lift the debt limit, which many senior Democrats had thought unlikely amid the GOP's internal fractures.
"The White House made an understandable but ultimately ill-advised bet that House Republicans could not get their act together, with the assumption the GOP would then fold under pressure from the business community," said Liam Donovan, a Republican political strategist. "But with the passage of a GOP debt limit proposal, any industry group or think tank that is more interested in keeping the economy on the rails understands that the path of least resistance is for Biden to sit down with McCarthy and come to a deal that allows everyone to save face."
Even critics of McCarthy's strategy see similar underlying dynamics.
"The so-called 'fiscally responsible' adults in the room have actually been happy to participate in a reckless strategy of hostage-taking and trying to force the White House to accept MAGA cuts," said Lindsay Owens, the executive director of the Groundwork Collaborative, a left-leaning group. "It has emboldened McCarthy and the Republicans."
Because of the messy House speakership fight that empowered the far right, and considering the rift between former president Donald Trump and the Washington establishment, Biden officials were optimistic that nonpartisan groups and the business lobby would see McCarthy's demands as the White House did - as an outgrowth of the antidemocratic fervor that had swept through the GOP.
They also felt buoyed by precedent. When the debt ceiling needed to be raised in 2021, for instance, some Biden aides felt a turning point had been a White House meeting with titans of industry, in which JPMorgan Chase chief executive Jamie Dimon, Nasdaq president and chief executive Adena Friedman and Citi chief executive Jane Fraser warned of the catastrophic consequences of defaulting. Senate Minority Leader Mitch McConnell (R-Ky.) ultimately agreed to raise the debt limit with few meaningful concessions.
McCarthy, however, has been able to keep these voices largely at bay. His ability to pass a debt limit and spending bill last month solidified his calls for negotiations. Many of the Washington budget groups and business lobbyists agree, as a matter of principle, with McCarthy's call for reducing the deficit by cutting spending. And Biden's outright rejection of even the possibility of talks alienated nonpartisan groups, however much they agreed that the debt ceiling needed to be raised.
In recent days, two of Washington's most influential business groups - the Chamber of Commerce and the Business Roundtable - urged Biden to agree to negotiations. White House aides had hoped both organizations would be pressuring Republicans to cave. Instead, on Tuesday night, after passage of the House GOP bill, Neil Bradley, the chamber's chief policy officer, called Biden's refusal to negotiate "the biggest difference between today and 2011 in terms of [his] ability to kind of get a deal." The chamber has for months been calling for negotiations.
Establishment Republicans also have been less likely to weigh in this year. In 2021, two former GOP treasury secretaries - Henry Paulson, who served under President George W. Bush; and Steven Mnuchin, who held the office under Trump - held private talks with McConnell aimed at resolving the impasse. Mnuchin said this week at the Milken Institute Global Conference that it was Biden's responsibility to cut a deal with congressional leaders, and Paulson declined to comment on whether he has weighed in with House Republicans.
Besides the Committee for a Responsible Federal Budget (CRFB), the Bipartisan Policy Center, another nonpartisan Washington group, has called for negotiations over the debt limit - a posture out of step with the White House.
"Our position has been - and it's no surprise from a bipartisan perspective - that the solution here has to be negotiations," said G. William Hoagland, a senior vice president at the Bipartisan Policy Center. "When you have a divided government, let's be honest and make a compromise. I don't think we're taking anybody's side, but we think both sides have taken a position."
The CRFB has come to a similar conclusion.
"If less time were spent finger-pointing and engaging in us-against-them rhetoric, our leaders could have already come up with a reasonable plan to lift the debt ceiling and pass a package of savings," said Maya MacGuineas, the organization's president. "They need to stop acting like two teams more intent on winning than governing."
Asked for comment, White House spokesman Michael Kikukawa reiterated the administration's position that House Republican brinkmanship is threatening to wreak havoc on the U.S. economy.
"The best thing for businesses and the economy broadly would be for Congressional Republicans to stop taking the economy hostage and avoid default, as they did three times under the last President," Kikukawa said in a statement.
The White House strategy that worked in 2021 faces several new obstacles in 2023.
Business lobbyists have much less influence with House Republicans than they once did, amid a growing split between corporate America and the GOP over a raft of policy issues and the rise of Trump-inflected populism.
"Having Hank Paulson sit down with Marjorie Taylor Greene is not going to help the situation," one business leader said of an influential pro-Trump House Republican from Georgia, speaking on condition of anonymity to assess the matter candidly.
On top of that, in 2021, Democrats controlled both chambers of Congress. All the White House needed to do to get a debt-limit increase passed into law was persuade McConnell and Senate Republicans not to block the measure. McConnell and Biden have a long history of working together, and White House officials often refer to McConnell as "the adult in the room," the people familiar with internal discussions said.
But McConnell has been adamant that he is not going to broker a deal with the White House this time, and Senate Republicans overall have backed that approach. With McConnell on the sidelines, it is unclear how the White House can persuade McCarthy to stand down.
"Part of the playbook in 2011 was really getting business leaders in key districts to lobby their congressman to tell them how important it was that the U.S. doesn't default on its debts," said Kenneth Baer, who was the spokesman for President Barack Obama's White House Office of Management and Budget during the 2011 debt ceiling standoff. "But this is not the Republican Party of George W. Bush or his father. Most of them do not care if Fortune 100 CEOs are freaking out."
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The Washington Post's Tyler Pager and Theodoric Meyer contributed to this report.
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