Debt Ceiling Battle Causes Biden to Cut Trip Short
On Tuesday, White House officials announced that United States President Joe Biden would shorten his overseas trip this week to focus on debt-ceiling negotiations. He had planned on traveling to Sydney, Australia, after the Group of 7 summit in Hiroshima, Japan. Now, he is canceling his stops to Australia and Papua New Guinea, the latter of which a sitting U.S. president has never visited.
What is the debt ceiling? The debt ceiling is the limit set by Congress on how much the government can borrow. This maxed out in January when it hit $31.4 trillion. Congress is currently in negotiations to raise the debt limit.
The Republican-majority Congress wants budget cuts and a rollback of some of Biden’s policies in exchange for raising the ceiling. Republicans are also calling for tougher work requirements on government aid recipients.
Their proposals would limit some of Biden’s priorities, including student loan forgiveness. Biden wants Congress to raise the debt ceiling without making these changes. He argues that a potential debt default and budget issues should be separate. Senate Minority Leader Chuck Schumer said at the U.S. Capitol yesterday, “Nobody should use default as a hostage.”
The 14th Amendment: Some have argued that, should they fail to reach an agreement, Biden can enact the 14th Amendment. Section 4 states that the “validity of the public debt of the United States … shall not be questioned.”
Legal scholars have argued that going into a default would be unconstitutional; therefore, Biden can invoke this clause to go around Congress and authorize the Treasury to repay U.S. debts even without the ceiling being raised. On May 9, Biden told reporters that he had not ruled out this option. If he were to use it though, it could possibly go to court.
If the debt ceiling is not raised: Historically, Congress has never refused to raise the debt ceiling when it is nearing its max or has already passed it. They likely won’t this time either. House Speaker Kevin McCarthy told reporters that he believes it is “possible to get a deal by the end of the week.”
In the event an agreement is not reached, the U.S. would have to default on its loans. It would be unable to borrow more money. Economists warn that this would result in:
- job losses and government employees not being paid on time
- massive reduction in consumer spending
- a recession
- stock market failure
- investors charging the U.S. even more to borrow money because it will be seen as risky and its credit rating will drop
- borrowing money becoming more expensive for everyone in the U.S. because government borrowing helps determine interest rates.
Unpopular view: Though failing to raise the debt ceiling would hurt the economy, catastrophe looms even if it is raised. If Congress compromises, as it likely will, the problem will only worsen down the road. The government will be able to pay its immediate bills, but at the cost of racking up an even higher debt.
The U.S. is in this position because it failed to deal with its debt problem when it was still manageable. It spends more than it can afford under the agreement that it won’t cross a certain line. When it reaches that line, it simply pushes it back further.
There might as well not even be a line if it’s not going to be adhered to. This is a matter of discipline.
Since being established in 1917, the debt ceiling has never been lowered. In the last six decades, it has been raised, extended or undergone a change in definition by Congress 78 times. Moving the boundary is not limited to any political party either. The debt limit has changed during both Republican and Democrat presidencies.
Is it too late to reverse this trend? The U.S. has to reduce its debt. That requires painful spending cuts, a choice that no president wants to make.
As the U.S. approaches the June 1 deadline for reaching a decision before plunging into default, Americans should expect to reduce their standard of living. Debt in the U.S. will only continue to climb. The higher it gets, the more devastating the fall when America is no longer able to raise limits and change definitions to sustain its bad habits.
The bottom line: Deuteronomy 28 records how God blesses for obedience to His laws and curses for disobedience. Verse 44 lists one of the curses: “He shall lend to thee, and thou shalt not lend to him.” America is experiencing financial curses because of disobedience to God’s laws.
Our article “Debt—the Moral Issue” explains the dangers of unbridled spending as well as the only solution to this downward spiral.
To learn God’s financial laws and how you can reap the blessings promised in Deuteronomy 28, request our free booklet The Financial Law You Can’t Afford to Ignore.