House Speaker Kevin McCarthy (R-CA) desperately wants to negotiate with Joe Biden about the debt limit. His idea: Make Biden agree to cut future spending in return for not plunging the U.S. and the world into another Great Depression. It's a brilliant move, except for one little thing: Biden refuses to negotiate with hostage takers. Treasury Secretary Janet Yellen is using every trick in her bag of tricks to delay the day of reckoning, but by June she will have run out of tricks. That's when the poop hits the ventilator.
Biden has countered McCarthy's requests by asking him to put together a budget that can get a majority in the House. Biden submitted a $6.8-trillion budget to Congress on March 9. He is asking McCarthy to put it into Excel and start hitting the DEL key until he has achieved the $4 trillion in cuts he wants and then publish the results. Biden well knows that the Republicans are badly divided on the budget and putting together one that pleases 218 of McCarthy's members will be nearly impossible, especially given what a weak leader McCarthy is. In particular, Social Security, Medicare, and defense make up the lion's share of the budget and many of his members don't want to cut any of them for fear that the Democrats would use that as a cudgel to beat them in 2024. But if they are left intact, it is very hard to make big cuts without devastating almost everything else.
On Tuesday, McCarthy conceded that he is not making progress on any front. Furthermore, his party is badly split on the consequences of a default. Senate Minority Leader Mitch McConnell (R-KY) has seen this movie before and knows that if disaster strikes, the Republicans will get the blame for the resulting depression. He doesn't want that, so he isn't going to help McCarthy at all. Another problem in the run-up to the deadline is that business leaders do not like uncertainty. They are in the process of informing McCarthy of this. They will also note that raising the debt limit without conditions has been done dozens of times before under both Democratic and Republican presidents, and will wonder why that can't be done now. (Quick answer: Because the Freedom Caucus has McCarthy's [insert body part here] in a vice.) Unfortunately for McCarthy, big business is an important constituency that he can't completely ignore.
So what happens next? No one really knows. Sometimes things spiral out of control. If we had to guess, out best guess is that Biden will offer to make some minor changes in the budget and then have a chat with the 18 House Republicans who are in districts Biden carried in 2020. He will try to convince five of them that tanking the world economy is not in their constituents' interest and that it would be in their own interest to vote with the Democrats and pass his "new" budget. But this is just a guess.
If this fails, Plan B might be to invoke the Fourteenth Amendment clause saying that the public debt "shall not be questioned" and just tell Yellen to keep issuing T-bills, notes, and bonds, and let the Supreme Court handle this hot potato in a few years. Though that would be bold, it might actually be the better choice. The debt limit was actually created to make spending easier, and was certainly never meant to facilitate hostage-taking. It would be useful to resolve this question once and for all; we tend to assume that the Supreme Court will prioritize the text of the Constitution (i.e. the Fourteenth Amendment) over the text of a bill passed by Congress (i.e., the legislation that created the debt limit). The six right-wing justices were chosen because of their social conservatism, not because they are budget hawks, so they are much more likely to call balls and strikes in a case like this as opposed to one about, say, abortion or Affirmative Action. (V)