The midterm elections left Republicans in control of the House (barely) and Democrats in control of the Senate (barely). Pundits are already predicting gridlock (they’re probably right), but Congress has two essential tasks before them that must not be held hostage by legislative paralysis: passing the annual appropriation bills that fund government operation, and raising the debt limit.
Congressional leaders face a choice — and it is a choice — between cooperation and chaos. If they fail to pass appropriation bills, federal agencies and the programs they administer will shut down. If they fail to raise the debt limit, the government will default on its obligations and instigate a financial crisis that will reverberate around the globe.
The post-Thanksgiving lame duck session of Congress might give us a preview of how things will play out next year. Congress is back in town to take up some unfinished business. Most importantly, they still need to pass full-year appropriations for the fiscal year 2023, which began on Oct. 1. Temporary funding enacted in a September “continuing resolution” expires on Friday, December 16.
An “omnibus” bill incorporating all 12 annual appropriation bills appears within reach, but much work remains to be done. Democrats, who will maintain control of the House and Senate during the lame duck session, have yet to agree on topline numbers for defense and nondefense spending. This has made it difficult for appropriators to finalize numbers for individual spending bills.
Some element of bipartisan cooperation will be needed to resolve the spending dispute because Senate Republicans retain the ability to filibuster regular legislation. Moreover, with Republicans poised to take control of the House in January, any perceived heavy-handedness by Democrats could incentivize Republicans to punt negotiations into the next Congress when they would have more influence on bill drafting. Another short-term spending patch, however, would harm federal operations, perpetuate the threat of a government shutdown, and delay the start of the budget process for the FY2024 appropriations which normally begins in mid-to-late January.
Another continuing resolution would also punt essential decision-making on time-critical issues such as funding for Ukraine’s war with Russia, new COVID funding for testing, vaccines and therapeutics, the fate of certain tax policies, and a pending Medicare sequester.
Simmering alongside the issue of annual appropriations is the need to address the federal statutory debt limit. Because the current cap is a dollar amount and not a calendar date, there is some uncertainty as to when it will be reached. If current recession fears materialize in 2023, federal revenues will slow and countercyclical payments to households will rise, causing Treasury’s march toward the limit to accelerate. There is also some question as to how long “extraordinary measures” can prevent Treasury from breaching the limit once it is reached.
Democrats have a strong incentive to raise or suspend the debt limit during the lame duck session to avoid onerous concessions to the new House Republican majority next year. While the need for a debt limit increase is not as imminent as the Dec. 16 deadline for appropriations, action will be required during the current fiscal year.
As of Nov. 23, the debt subject to limit stood at $31.3 trillion, just $100 billion short of the $31.4 trillion statutory cap. The Treasury Department can buy a little time by, for example, temporarily suspending the purchase of Treasury securities by state and local governments (i.e., “extraordinary measures”) but ultimately if Congress does not act to extend the debt ceiling, then the federal government will default on a portion of its debts.
The prospect of a debt limit standoff is even more threatening than a federal agency shutdown because a default on government obligations would damage the nation’s creditworthiness, increase interest rates, and interfere with the smooth functioning of global financial markets. Even a short-term agreement to increase the debt limit would help alleviate such concerns and signal to voters and — more importantly — the financial markets that both parties take this threat seriously.
In theory, Democrats could lift the debt limit on their own in the lame duck session via reconciliation but doing so would require many time-consuming and politically perilous steps and would certainly harm efforts to achieve bipartisan agreement on appropriations legislation.
Rather than begin their newly conferred shared control of the legislative branch by veering off in separate directions, leaders in both parties should instead explore avenues of compromise on appropriations and the debt limit in the lame duck session. Ending the year with no shutdown and no imminent threat of default would be at least a temporary victory of cooperation over chaos as we head into the new year.
Robert L. Bixby is the executive director of The Concord Coalition.