Biden faces GOP debt showdown with bitter memory of 2011 crisis
Published in News & Features
WASHINGTON — Joe Biden was there in 2011 when Democrats tried to negotiate the type of broad deficit-reduction plan that GOP lawmakers are once again demanding as a condition of raising the federal debt ceiling.
The talks imploded, setting off a brinkmanship-ridden saga that narrowly averted default, led to the first-ever U.S. credit-rating downgrade and hardened both parties’ positions in future debt-limit debates.
Twelve years later, Biden has made clear he remembers the lesson. Biden says he won’t negotiate while the debt limit is held hostage, setting up what veterans of the 2011 ordeal say is looming as an even more fraught showdown over the next several months on raising the borrowing cap.
The president has drawn a firm line in the sand, dismissing out of hand negotiating sharp cuts with House Speaker Kevin McCarthy just to do what the U.S. has always done: avoid default. McCarthy, who won the speaker’s gavel only after 15 drama-filled rounds of balloting, has little room to move off his demands. He’s beholden to a group of ultra-conservatives whose support he needs to maintain his razor-thin majority.
“The debt limit situation is the scariest it’s been in the 25 years I’ve been working on these issues,” said Jason Furman, an Obama-era head of the Council of Economic Advisers who sees a roughly 15% chance of a default. “It still probably will be resolved, but if my doctor told me I was ‘probably’ going to live, I wouldn’t find that diagnosis very reassuring.”
An examination of how the negotiations played out in 2011 provides clues to why Biden, then vice president, and McCarthy’s positions are so far apart this time around. Back then, both parties explored a “grand bargain” of deficit-reducing spending and tax changes, including talks with Biden and then-Majority Leader Eric Cantor.
But Cantor abruptly walked away from the negotiating table, leading to an increasingly acrimonious showdown between President Barack Obama and Speaker John Boehner that would sour the relationship between the White House and the House GOP for the rest of Obama’s time in office.
“It was the first time we found ourselves in a negotiation where there were significant views on the other side that default was truly an option,” said Jack Lew, a former Treasury Secretary who served as Obama’s budget director in 2011 and was deeply involved in the debt-limit negotiations. “We could see the edge of the cliff. We were checking the Asian markets every night to see whether Asia thought we were there.”
Eventually Biden, working with Senate GOP Leader Mitch McConnell, helped seal a last-minute spending cap agreement that avoided a default.
The Tea Party wave that swept Republicans to control of the House in the 2010 midterms set the table for the 2011 debt showdown, similar to how the GOP’s performance in November has this time around.
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