The News Not Noise Letter: Financial Calamity Averted
Subheading: In an act of extraordinary bipartisanship, Washington dodges a catastrophic debt default. What’s in the law? How did we get here? That and more in tonight’s newsletter.
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America will not default on its debt in 2023:
After months of tension and weeks of round-the-clock negotiations, Congress passed a bipartisan deal to suspend the debt ceiling until 2025. President Biden will sign the deal Saturday. This will avert a default and spare the world a global financial crisis — so we can all let out that breath we’ve been holding. This was by no means an inevitable outcome. It took masterful politics by Biden and, in the end, Speaker McCarthy and Senate leaders. The ultimate votes were truly bipartisan, with 149 GOP and 165 Dem votes for the deal in the House and 17 GOP, 45 Dem, and 2 independent votes in the Senate. In his first Oval Office address to the nation, President Biden said that “both sides operated in good faith. Both sides kept their word.”
Today, instead of diving into news that doesn’t suck, we’re answering your questions and breaking down the debt ceiling deal: what’s in it, how we got here, and what it means for you. We also answer your questions about how it impacts student loans, taxes, food aid, and more.
Why did this chaos drag on so long? Why didn’t Biden use the 14th Amendment to force a debt deal?
Section 4 of the 14th Amendment says that “The validity of the public debt of the United States, authorized by law… shall not be questioned.” Some on the left, including Sen. Bernie Sanders, argued that President Biden should have avoided the debt ceiling negotiations altogether by invoking this clause of the 14th Amendment to end-run Congress and raise the debt limit without them. This has never been done.
Using the 14th Amendment isn’t a solution, it’s a Hail Mary pass. If Biden had invoked the 14th Amendment in this way:
It would’ve gone to the courts, up to the Supreme Court — and we have no way of knowing how they’d rule. If they found that invoking the 14th in this way was unconstitutional, we would’ve been in default without a plan forward.
Regardless of the Court’s ruling, there wouldn’t have been enough time to wrap up all the chaos before the early-June debt ceiling deadline. With the timing of negotiations coming down to the wire, international credit-rating agencies warned the US might risk a credit downgrade. These agencies regularly evaluate how creditworthy various nations are, and the US had a pristine AAA rating until the last major debt ceiling drama in 2011, when we were downgraded to an AA+ rating by S&P after narrowly avoiding a default. They downgraded us because they found our system of government wasn’t working, making us a credit risk. Any further downgrade would mean dangerous ramifications for the US’s global standing and, crucially, for the world economy.
So invoking the 14th Amendment would’ve been a risky untested gamble that would have endangered the global economy. Pass.
What did Biden do?
There are reasons Democrats can legitimately argue it’s unfair a Democratic White House had to compromise on the debt limit when that’s never happened before. But the reality is, the House GOP had leverage, used it, and our government is built on compromise. Biden faced reality and agreed to compromise. This is a bigger win for Biden than you might think because the deal ultimately gives away less of the Democrats’ agenda than news reports suggest, and avoids financial catastrophe. It also pushes off future debt fights until after the 2024 election and shows the Biden team’s acumen at navigating tricky politics in a closely divided Congress.