5 things to know about the debt ceiling crunch

For more politics coverage and analysis, sign up for Here’s the Deal, our weekly politics newsletter, here.

It’s go time.

Treasury Secretary Janet Yellen now has pinpointed the deadline by which the nation must raise its debt ceiling — its borrowing limit — or face a potentially catastrophic financial crisis.

And it is soon. Early June and possibly June 1, Yellen wrote in a letter to House Speaker Kevin McCarthy.

A great many words will be said in the coming days about what should happen now. Here we want to use as few words as possible to simply lay out the dynamics and options ahead.

Let’s look at the calendar(s)

Birds fly over the main rotunda of the U.S. Capitol building at sunset. Photo by Evelyn Hockstein/Reuters

• Per the Gregorian calendar, June 1 is 30 days away.
• But on the House calendar, it is a mere 12 working days away. And on the Senate calendar, that is just 13 days away.
• Disjointed calendars. Adding to the challenge here, the two chambers’ schedules are not synchronous. They are in Washington together for just two weeks, or eight days, this month.
• Potential key date: May 9. President Joe Biden is proposing a meeting of the “Big Four,” the party leaders from each chamber of Congress, in just seven days.
• Why not sooner? Among the reasons is that Speaker Kevin McCarthy is traveling this week. May 9 is the first day the House returns to session after recess this week. (It is also National Lost Sock Memorial Day, which seems a jolly metaphor for our lawmakers’ difficulty in reaching a compromise.)
• Other key date: May 19. Here is another issue. While the House returns to Washington on May 9, the Senate leaves on May 18 or 19 for a 10-day Memorial Day recess. The Senate then returns for session May 30 and 31. But that leaves just a day or two, potentially, before the earliest deadline. The upper chamber generally needs a week to move major legislation, due to its time-consuming rules.
• Why is this important? The short timeframe to maneuver is a significant part of the strategy and decisions for both parties here.

When is the debt ceiling emergency meeting?

• For the proposed May 9 meeting, Biden invited: House Speaker Kevin McCarthy, Senate Republican Leader Mitch McConnell, Senate Majority Leader Chuck Schumer and House Democratic Leader Hakeem Jeffries.
• Per sources familiar, Speaker McCarthy has agreed to meet on the 9th. But so far it is not clear if Sen. McConnell will go.
• One factor: Republicans want negotiations to be solely between the two key players here — Biden and McCarthy. Democrats see an advantage in numbers.
• Watch for: If McCarthy and Biden have a phone call or two, ahead of May 9. Ideally, May 9 should be closer to the end of talks than the beginning.

What are the agendas at play?

House Speaker Kevin McCarthy, R-Calif., speaks at the the New York Stock Exchange (NYSE) in New York City. Photo by Brendan McDermid/Reuters

• Democrats are insisting on a “clean” bill that does nothing except raise the debt ceiling. Monday, Schumer teed up a two-year extension for a possible Senate vote in weeks ahead.
• Republicans are insisting that any debt ceiling increase must come with concessions that begin to rein in future red ink.
• This is a tricky situation for both Biden and McCarthy.
• Biden needs to do conflicting things at once: Negotiate about overall federal spending, as Republicans demand, but somehow not do that in relation to the debt ceiling discussion. The White House on Monday indicated how it will approach the gymnastics here, writing, “President Biden … invited the four leaders to the White House to discuss the urgency of preventing default, as well as how to initiate a separate process to address the budget and fiscal year 2024 appropriations.” We will see.
• McCarthy has a different dilemma. He needs to come up with either a way to buy more time, such as a short-term debt ceiling increase, or turbo-track the conversation with his Republican conference about what demands, and in what form, are really bottom line for them.

What are the stakes?

They are enormous.

• Full faith and credit of the United States. Multiple credit agencies negatively changed how they viewed the U.S. as a borrower after the 2011 debt ceiling crisis, including a downgrade from AAA status by Standard & Poor’s. The U.S. has always paid its bills. But that is at stake here.
• A different fiscal crisis — a debt crisis — ahead. The U.S. has long been wading into risky waters with its levels of debt. So far, no problem. But in the coming years, the interest costs alone will weigh down the U.S. government. If not tackled soon, that would eventually mean large tax increases and large spending cuts, including potential cuts to cherished programs, like Social Security. Or the military. Only significant action soon can avert that.
• McCarthy’s speakership. As we’ve talked about here, to become speaker, McCarthy allowed a rule that permits any single member of the House to force a vote to oust him. This is why, politically, he cannot sign onto a “clean” debt ceiling bill. The vast majority of his conference opposes it and the loudest voices proclaim it a betrayal. He needs to get something out of this negotiation, or his speakership is on the line.
• Biden versus McCarthy, aka Democrats versus Republicans. Ultimately, one or both sides will need to give in here. But both see this power struggle in relation to their 2024 hopes. The next election is adding to the stakes here.

Where do the votes stand?

Senate Majority Leader Chuck Schumer, D-N.Y., is reflected in a camera lens as he discusses the debt ceiling during a news conference on Capitol Hill. Photo by Amanda Andrade-Rhoades/Reuters

Margins are incredibly close in both chambers. And that means individual players will have outsized influence.

First, the House. Currently, there are 222 Republicans and 213 Democrats.

• Four-vote margin. McCarthy can lose just four votes for a bill to pass with only Republicans, as he did last week on his own debt-ceiling bill. It squeaked by with just enough votes.
• 16 perennial no’s. Among the potential problems, McCarthy has a platoon of members who have never voted for a debt ceiling increase.
• Given that — and that the White House and Senate must get on board — it is impossible to see a final deal that gets only the votes of Republicans in the House. It will have to be bipartisan.
• A bill could easily pass the House with every Democrat and just five Republicans. Democrats would love that. But it would imperil McCarthy as a speaker.
  An option to watch. The bipartisan Problem Solvers Caucus is proposing a commission that comes up with longer-term solutions for the government’s red ink. House Republicans don’t like that — they want action now. But if it is a choice between a commission and default, they may have to consider it.

Now, the Senate. Currently, there are 48 Democrats and 3 independents who voted with Democrats to organize the Senate (Sens. Angus King, Bernie Sanders, Kyrsten Sinema) and 49 Republicans. But remember: Democrat Sen. Dianne Feinstein remains out indefinitely, recovering from complications of shingles.

• Any debt or spending bill needs 60 votes to pass in the Senate.
• Currently, Senate Republicans are generally backing McCarthy and his push for spending cuts in return for raising the debt ceiling.
• But some vulnerable Democrats, like Sen. Jon Tester of Montana, are sticking with Democrats and saying it’s time for a debt-ceiling-only bill.
• Watch for: Swing Republicans, like Sens. Bill Cassidy, Susan Collins, Lisa Murkowski, Mitt Romney and Todd Young.
• Note: Some previous key Republicans with expertise in fiscal policy have retired. The lack of Sens. Rob Portman and Pat Toomey adds to the “Who knows?” dynamics.