Biden world eyeing lame-duck action on debt ceiling and a lift past 2024

President Joe Biden hasn’t yet lost control of Congress. But already, his administration is preparing for its first major showdown with a newly emboldened Republican party.

Senior Biden officials and allies are exploring a series of strategies for raising the debt ceiling, in a bid to avert a standoff with Republicans next year that threatens to further rattle financial markets and endanger the nation’s fragile economic recovery.

The private discussions have focused largely on whether Congress can and should head off the high-stakes conflict before it begins by striking a lame-duck session deal to lift the debt limit — or, in a sign of the grave concerns within the party, deploying a procedural tool that would allow Democrats to unilaterally pass an increase. Under consideration is a debt ceiling hike that would extend past the 2024 election, in effect removing the drama for the rest of Biden’s term.

The debate comes as several Republicans have advocated for using the debt ceiling to extract concessions from the White House, and reflects growing fears in Democratic and economic circles that the GOP may be willing to put the country’s credit and financial stability at risk in pursuit of its political goals.

The U.S. has never defaulted on its debt. But such a move would immediately send the economy into a tailspin, spike interest rates and reverberate across the globe.

“It’s just over-the-top lunacy to go down that path, but I think the odds are rising that we will,” Mark Zandi, the chief economist at Moody’s Analytics, said of breaching the debt ceiling. “If we’re not in a recession by then, we will be.”

The White House is unlikely to land on a way forward until after the midterms, and could still allow the issue to spill into 2023, when a new Congress will be sworn in. In public, officials have refused to discuss any priorities beyond the election — insisting that Democrats still have a shot at holding their House and Senate majorities.

Biden, who as vice president was at the center of Obama-era debt ceiling brinkmanship, has ruled out abolishing the debt limit, deeming it an "irresponsible" idea. But he's seized on Republicans’ rhetoric around it in the final days of the midterm campaign, warning the GOP will tank the economy if given control of Congress.

“Nothing, nothing, nothing will create more chaos and do more damage to the American economy than playing around with whether we pay our national bills," Biden said during an appearance Tuesday in Florida.

Still, within the administration and on Capitol Hill, there is little doubt that Republicans are poised to take at least the House — and that Democrats will need to move quickly to take full advantage of their final weeks in power.

Democratic leaders are already juggling several competing priorities for the lame-duck session, including efforts to pass a major defense bill, push through outstanding energy-permitting legislation and vote on proposals protecting same-sex marriage and shoring up the electoral process. Congress also needs to reach a government funding deal before its Dec. 16 deadline.

Yet as those preparations have intensified in recent days, many Democrats have come around to what one person familiar with the discussions described as “growing agreement” that the debt ceiling must be resolved if at all possible before the end of the year.

“You’re talking about really tearing out the insides of the country,” one economic adviser to top Democrats said of the threat of a debt default. “It should take a superhuman effort from rationally minded people to do everything possible to head this off at the pass.”

Still, the paths forward are limited. The Biden administration is weighing whether to negotiate a deal with Senate Republicans to lift the cap in the weeks after the midterms, in hopes Minority Leader Mitch McConnell will be open to avoid the potential economic damage of a debt limit standoff, people with knowledge of the early strategizing said.

The alternative would be for Democrats to use the budget reconciliation process to raise the debt ceiling with just 50 Senate votes — an approach that would bypass Republicans altogether, but require a number of procedural steps that could eat up precious floor time lawmakers had hoped to devote to other last-minute agenda items.

Some Democrats have floated more aggressive proposals, including giving the administration unilateral power to lift the debt ceiling, raising it some unfathomable amount so as to effectively eliminate it, or pushing Biden to reconsider abolishing the cap altogether. In a letter sent earlier this week, 31 House Democrats urged their Hill leadership to “permanently end the threat that the federal debt ceiling poses to our economy and our standing in the world.”

But some Biden advisers view the elimination option as politically ill-advised and far more difficult to find consensus on even among Democrats.

“It would be a very hard vote to explain to people that we will borrow as much as we want to borrow with no limits,” said one Biden adviser. “The attack ads write themselves.”

Officials are still holding out hope that McConnell, who was the top Senate Republican during the 2011 debt ceiling standoff, will be keen to avoid a repeat of that damaging episode more than a decade later. But his willingness to cooperate could hinge at least in part on Democrats keeping control of the Senate; a proposition that's looked increasingly uncertain in the campaign's stretch run.

There’s less faith that House GOP leader Kevin McCarthy will be open to discussions, especially in the face of calls from his conservative wing to use the debt limit as leverage to negotiate spending cuts. Former President Donald Trump has repeatedly attacked McConnell for not using the debt ceiling as leverage, saying Thursday that Republicans should "impeach" McConnell if he brokers a debt limit deal with Democrats.

“If I were the Democrats, I would try and move an extension during the lame duck,” said Doug Heye, a Republican strategist who was a House GOP leadership staffer during the Obama debt ceiling battles. He added that the party’s conservative base is likely to cheer on a debt limit fight even if there’s no clear exit strategy. “If they don’t, then they’re in a situation of having to negotiate with Republicans who don’t really want to negotiate.”

Biden advisers expressed confidence that Republicans would ultimately take the blame for any fallout from playing chicken with the debt ceiling, emphasizing that it would be up to McCarthy to hold together his fractious caucus and sell the public on his demands — whereas Democrats could unite behind the simple position that lifting the cap shouldn’t be up for debate.

But Biden himself hasn’t yet come to that position. While the White House has stated that it believes any bill to hike the debt limit should be clean and ruled out entitlement reforms as part of any deal to raise the ceiling, it has not drawn similar lines around discretionary spending cuts.

The assumption, in part, is that the specter of an economic disaster will do some of the political heavy lifting for them.

“Every time we go down this road, we get closer and closer to the brink,” Zandi said. “If they slip up even a little bit, the consequences will be very serious.”

Ben White and Sarah Ferris contributed to this report.