Ronald Brownstein writes:

President Joe Biden has already made the most important domestic-policy decision he’ll likely face this year. Biden and his top advisers have repeatedly indicated that they will reject demands from the new GOP majority in the House of Representatives to link increasing the debt ceiling with cutting federal spending. Instead, Biden is insisting that Congress pass a clean debt-ceiling increase, with no conditions attached.

Biden’s refusal to negotiate with Republicans now is rooted in the Obama administration’s experiences in 2011–15 of trying to navigate increases in the debt ceiling through the same political configuration present today: a Democratic Senate and a Republican House. While Biden says he won’t negotiate a budget deal tied to a debt-ceiling increase, then-President Obama did just that in 2011. Those negotiations not only failed but proved so disruptive to financial markets, and so personally scarring, that Obama and his team emerged from the ordeal determined never to repeat it. And when House Republicans came back in 2013 asking for more concessions in exchange for raising the debt ceiling again, Obama declined to negotiate with them; eventually the GOP raised the debt ceiling without conditions.

To understand the choices Obama made about debt-ceiling negotiations, and how they are shaping Biden’s approach today, I spoke with multiple officials from the Obama era: several Cabinet secretaries, as well as top aides from the White House, executive-branch departments, and Capitol Hill. Most chose to speak without attribution to candidly discuss Obama’s deliberations. What’s clear from these conversations is that almost none of the conditions that led Obama to negotiate in 2011 are present today. This helps explain why Biden is rejecting Republican demands, but also why the risk of a cataclysmic default is even greater now than it was then.

When Congress raises the debt ceiling it does not authorize any new spending; it permits the Treasury to pay the debts the U.S. has incurred from earlier fiscal-policy decisions. A failure to raise the debt ceiling would lead to the federal government defaulting, something that has never happened, and which could crater the stock market, spike interest rates, and disrupt payments to the millions of Americans who rely on federal checks.

In some ways, Biden’s staunch refusal to link fiscal negotiations to a debt-ceiling increase is out of character for a politician who spent nearly four decades in the Senate and has prided himself on his ability to reach agreements across party lines. Even now, administration officials make clear that Biden is not precluding negotiations with House Republicans over fiscal policy. What Biden is saying is that he won’t allow Republicans to link fiscal negotiations to the threat of not raising the debt ceiling. That resolve flows directly from the Obama administration’s experiences. [Continue reading…]