Why was it so hard for Biden, McCarthy to make a deal on debt ceiling? A look at history

President Joe Biden meets with House Speaker Kevin McCarthy (R-CA) in the Oval Office of the White House recently to discuss ways to suspend or raise the government’s debt limit.

President Joe Biden meets with House Speaker Kevin McCarthy (R-CA) in the Oval Office of the White House recently to discuss ways to suspend or raise the government’s debt limit.

Drew Angerer/Getty Images

You can try to ignore it, but debt will never just go away.

That’s as true of your personal financial obligations as it is of our national ledger. President Joe Biden and Congress have been facing the familiar problem as agencies warn that the government’s sacred credit ratings will be threatened if something isn’t done.

A dozen times over the past years, the president has struck a deal with Congress to increase or suspend the national debt. The U.S. government has never defaulted, usually because lawmakers raise or suspend the debt ceiling and pass along the bill for our overspending to future generations.

As Biden and House Speaker Kevin McCarthystruggled to reach an agreement in the latest round of negotiations, an agreement scheduled to face congressional votes this week, it’s instructive to look at a time when our government balanced our expenses with what we brought in — and even came out with a surplus.

The dealmaking wasn’t always as contentious as it is today. President Bill Clinton and House Speaker Newt Gingrich were able to negotiate a balanced budget deal that helped create four straight annual budget surpluses around the turn of this century. While the economy was in better shape at that time and the political circumstances were different, there are some similarities when it comes to the debate about debt.

Something that’s true about then and now is that it’s hardly uncommon for both sides to use apocalyptic rhetoric, and then once a deal is set criticize how they didn’t get what they really wanted. In the end, most lawmakers realize that the public generally wants to see the government function, so members of Congress reluctantly vote yes.

The other hope is that many of the differences are not that great. Both parties’ leaders are willing to put restrictions on spending; it’s just a question of how long the caps would persist. And there is no talk of a grand bargain that would make serious reductions in debt or deficits.

“We’re talking about crumbs at this point,” said Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget, a Washington watchdog group.

The hope of veteran budget-watchers was that the negotiators will create a bipartisan commission that will recommend bold steps to reduce the debt.

“There are no saints in these fights. Both parties have raised the debt ceiling dozens of times when it suited them, and both parties bear some responsibility for the size of the debt” in different ways, said Linda Bilmes, former Commerce Department officials and now senior lecturer in public policy and public finance at the Harvard Kennedy School.

She saw the only way to change the debt trajectory is with bipartisan reform, which means “perhaps try again with a commission,” maybe one led by veteran dealmakers such as Clinton and Gingrich, or former Republican House Speaker Paul Ryan or Democratic House Majority Leader Steny Hoyer.

What is different about today?

Clinton in 1997, had just won re-election. He was able to author a tax increase in 1993 that brought revenue pouring in. By fiscal 1998, which began in October 1997, the budget showed a surplus for the first time since fiscal 1969.

Today the political calculus is far different, making solutions more elusive.

“We are at a point now where the political polarization is debilitating,” said MacGuineas.

Biden faces re-election next year. McCarthy presides over an often raucous band of conservatives insisting on deep spending cuts. Congress’ political party split is close to even. The economy is healthy but flirting with a possible recession. The fiscal 2022 deficit was $1.38 trillion.

The government reached the latest debt limit in January, $31.4 trillion, and Treasury has been keeping the bills paid with what it calls “extraordinary measures.” Those measures will have been exhausted by June 5, Treasury now estimates.

The more somber reality, though, is that obstacles to a meaningful agreement are enormous, and any lessons from 1997 as well as other recent debt and spending fights seem elusive if not forgotten.

Here’s what’s changed:

The debt and deficit issue. It was a big deal in the 1990s. Clinton ran on a pledge to dramatically reduce deficits, and his first big initiative after he was elected in 1992 was a huge package that raised taxes on the wealthy while cutting spending.

By 1997, deficits were dropping, the idea of surpluses wasn’t far-fetched, and the public was paying attention.

During the 1996 presidential campaign, a CNN/Time poll asked voters what they saw as Washington’s top priority. The top issue was a balanced budget agreement, mentioned by 31%.

Last month, Gallup found the economy, largely because of concerns about inflation, was mentioned as the second most important issue on voters’ minds (the government and poor leadership was first). But only 2% mentioned the federal deficit and debt as their most important issue.

The upcoming election. “Clinton was able to negotiate from a position of strength,” recalled Rep. Jim Costa, D-Fresno.

Clinton had just been re-elected to a second term, which he won after a bruising battle with Republicans in 1995 and 1996 over government spending. The government shut down twice during that fight, but much of the public didn’t punish Clinton for the chaos.

Biden, on the other hand, faces what could be a difficult re-election. His latest Gallup Poll approval rating, taken last month, was 37%, the lowest of his presidency. Clinton averaged between 55% and 61% in the summer of 1997 as the balanced budget agreement was being negotiated.

At the same time, McCarthy needed 15 ballots to be elected speaker in January, and can afford to only lose four votes among Republicans to get anything passed without Democratic help.

A bigger debt. In 1997, prospects were that deficits would come down, as the economy boomed and a gusher of revenue spurred by the 1993 tax increases poured into the Treasury.

The debt in September, 1997 was $5.4 trillion. Today, thanks to spending on COVID relief programs, the Iraq and Afghanistan wars and several rounds of big tax cuts, the debt is $31.4 trillion.

Put another way, the summer of 1997 debt was about 63% of Gross Domestic Product. Today’s figure is about 120% of GDP.

“Our debt is much higher now and we’re facing trillion-dollar annual deficits rather than any possibility of a surplus soon,” said Michael Peterson, chief executive officer of the Peter G. Peterson Foundation, a nonpartisan group that advocates for finding ways to address the nation’s fiscal challenges.

“Kicking the can on our structural imbalances for 26 years has certainly weakened our fiscal foundation, to a point where interest is becoming our fastest-growing government program,” he said.

Polarized politics. Though Gingrich had steered the GOP through the 1995-96 shutdowns, he was still well-regarded by Republicans as the leader whose strategy helped the party win control of the House in 1994 for the first time in 40 years.

By 1997, the House had maintained its majority, and Gingrich was ready to deal. “Newt Gingrich was an odd guy. But he’s not a stupid guy and he also was somebody who would maneuver,” said Rep. Zoe Lofgren, D-San Jose.

Clinton, too, had moved away from Democratic liberal orthodoxy. In 1996, he signed a welfare reform package and enraged many liberals, as it set up new work requirements for recipients and placed limits on federal benefits.

In 1997, “everything was on the table. Today it’s not,” said William Hoagland, staff director for the Republican-led Senate Budget Committee during the 1997 budget battle.

“With both Newt and President Clinton, they put things on the table as things went along. In this case, it may be a different dynamic,” said Rep. Darrell Issa, R-San Marcos.

The deal 1997 ultimately included sweeping changes in Medicare and Medicaid. Today, Democrats are balking about imposing work requirements for Medicaid, the joint federal-state program for lower income people.

Social media. There was no Twitter, Instagram or ubiquitous cellphone cameras to record every utterance in 1997.

Today, Republicans and Democrats in Congress have been providing comments in the halls of Congress and all over television throughout each day.

Usually those briefings offer absolutes or pithy sound bites, not the nuances of bargaining. “Should you just raise the debt limit or should you literally think let’s just eliminate some waste?” McCarthy asked Wednesday as reporters surrounded him.

To MacGuineas, the messaging war helps show “the political parties are out of practice” when it comes to negotiating fiscal matters. “Many of them have never done this before,” she said.

So unlike the budget fight of 1997, or most other such negotiations, this is a slugfest where politics in on the marquee.

”I’m not sure this is about deficits and debt. This is politics at its worst. The Republicans want to do the president in. A lot of people in the Biden administration want to do McCarthy,” said Hoagland.

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