WASHINGTON — No matter the electoral outcomes of November, lawmakers will likely face an urgent economic crisis to start the new year.
Unless the current Congress passes legislation to allow the federal government to borrow more money to pay its debts, and President Joe Biden signs that bill into law before he leaves office, the next Congress will be forced to confront the debt ceiling, a limit on how much the U.S. can borrow to make good on its financial obligations.
Legislation signed into law in June 2023 suspended the debt limit until Jan. 2, 2025.
All members of the New Jersey delegation voted for that legislation, except for Rep. Jeff Van Drew (R-2nd). And all those members, except former Reps. Bill Pascrell (D-9th) and Donald Payne Jr. (D-10th), both of whom died this year, are on the ballot in November and would face that debt-ceiling vote again if reelected. Former Sen. Bob Menendez also voted for that bill, but he is not running for reelection after a federal jury in New York found him guilty on corruption charges.
That bill passed the House 314-117 and cleared the Senate by a vote of 63-36.
Congress risks plunging the domestic and global economies into turmoil if it does not reach agreement to raise the debt ceiling, a legislative barrier the U.S. implemented in an attempt to rein in the national debt.
Trump’s intervention
While former President Donald Trump, the Republican nominee for president, has argued his party should use the debt ceiling as a political bargaining chip to extract concessions from congressional Democrats, economists broadly agree breaching the ceiling would be economically crushing.
“I think it’s pretty safe to say that if we were to default, it makes the odds of a recession almost certain,” Jacob Lew, who served as a Treasury Secretary under former President Barack Obama, said in April 2023 at a Council on Foreign Relations event.
When the deadline to raise the debt ceiling neared last year, the Treasury Department used accounting steps known as “extraordinary measures” to keep the federal government from defaulting on its debt, including by dipping into cash reserves.
If the current debt ceiling is in place in January, the department would likely have to take similar steps, but experts say such measures only buy weeks or months before Congress must intervene.
The federal debt has grown steadily in recent decades, expanding under congressional leaders and presidents of both parties, Republicans and Democrats.
“The debt ceiling will be reinstated on January 1, 2025, just days before the swearing in of the 119th Congress and weeks before inauguration,” the Peter G. Peterson Foundation, an advocacy group keen on reining in the U.S. debt, said in a statement in May.
“If lawmakers don’t come to an agreement by the time that extraordinary measures lapse, the federal government may be at risk of defaulting on its debt,” the group said. “Even a short-term breach in the debt limit could have significant economic implications — reducing gross domestic product, wiping out trillions in U.S. household wealth, and resulting in the loss of millions of jobs.”
Van Drew’s rationale
The U.S. has never defaulted on its debt. Presidents of both parties have signed legislation since the 1980s to raise various debt ceilings.
Van Drew said, in part, he voted against the debt ceiling deal in 2023 because it did not “include enough spending cuts, something which the majority of Americans wanted in a debt ceiling lift, and did not include conservative priorities that the people elected us to deliver.”
The process of raising the debt ceiling — giving congressional approval to borrow more money to pay back U.S. creditors — is separate from efforts to cut the national debt.
Last year, months before congressional leaders and the White House reached the current debt-ceiling deal, Trump prodded Republicans to leverage their legislative power in the House by “playing tough in the upcoming debt ceiling negotiations.”
“It will be a beautiful and joyous thing for the people of our country to watch,” Trump wrote in a post on Truth Social, a social-media platform he founded. And in May last year, Trump told a radio station in Des Moines, 10140 WHO, he would have approved of a default. “I would have done that,” he said.
The federal debt has grown steadily in recent decades, expanding under congressional leaders and presidents of both parties, Republicans and Democrats, from about $10 trillion in 2008 to roughly $26 trillion during the COVID-19 pandemic in 2020 to its current status of approximately $34.6 trillion, according to data from the Federal Reserve Bank of St. Louis.
In 2011, the Republican-majority House flirted with voting against lifting the debt ceiling, resulting in the first time the U.S. government’s credit rating was downgraded.
— Chart by Genesis Obando
