The debt ceiling battle on Capitol Hill pits US businesses against Congressional Republicans in a test for business groups that have historically aligned with GOP lawmakers on economic issues.
Republican Senate leaders are deepening their opposition to increasing or suspending the debt limit, prompting strong warnings from lobby groups that represent some of America’s largest corporations.
The stakes are high in the stalemate between Democrats and Republicans. Defaulting on debt – or even approaching it dangerously – could undermine the country’s credit rating and disrupt the global financial system, posing a major risk to stock prices and corporate bonds.
âThe failure of the United States to meet its obligations is not an option; we are counting on Congress to take the necessary action to address the debt limit, âsaid Neil Bradley, executive vice president and director of policy at the United States Chamber of Commerce, the world’s largest lobby group. company in the country.
House Democrats on Tuesday unveiled a bill to suspend the debt ceiling until after the 2022 midterm election. While the measure is expected to pass the House, the Senate Minority Leader Mitch mcconnellAddison (Mitch) Mitchell McConnell McConnell and Shelby propose government finance bill with no debt cap Franken targets senators on both sides in new comedy tour Woodward: Milley “was putting reasonable precautions” with calls in China MORE (R-Ky.) Privately whips his caucus to vote against the measure as it relates to the upper house.
Republicans want Democrats to “own” the debt ceiling hike by including it in their $ 3.5 trillion reconciliation bill, which can be passed by the Senate 50-50 with a majority simple. But Democrats are insisting on a bipartisan vote to increase the limit, noting that it will not be included in their reconciliation plan, which may not be ready when the United States approaches a default in October. A bipartisan measure would require 60 votes to pass the Senate.
The risky strategy pits Republicans against U.S. corporations, whose executives urge Congress to raise or suspend the debt limit as soon as possible given the likely financial turmoil that would ensue.
A coalition of groups representing investment firms and banks, including Morgan Stanley and Bank of America, warned congressional leaders in a letter last week that a default would damage the country’s credit, make it harder to debt repayment and hit the financial markets that depend on the United States. Treasury bonds.
“Failure to meet our existing obligations would be irresponsible and cause irreparable harm to the US economy and taxpayers,” the groups wrote.
The Business Roundtable, which represents the CEOs of some of the country’s largest companies, separately sounded the alarm that a default would impose significantly higher borrowing costs on the federal government and private companies.
“Failure to raise the US federal debt limit to meet US obligations would produce an otherwise avoidable crisis and pose an unacceptable risk to the country’s economic growth, job creation and financial markets,” Joshua wrote. Bolten, CEO of Business Roundtable, and Doug McMillon, CEO of Walmart. to the leaders of Congress.
Republican opposition to raising the debt limit points to the gap between GOP lawmakers and American businesses that has only grown in recent years. Business leaders can still count on Republicans to deliver tax cuts, but their influence has waned on other hot issues like climate change, voting rights and immigration.
No House Republican voted for the John lewisJohn Lewis House Democrats unveil law to restrict presidential power Michelle Obama seeks to mobilize voters for midterms Harris, CBC has put weight in support of activist-led National Black Voters Day MORE Voting Rights Advancement Act after more than 150 large companies employing 4 million American workers urged them to support the bill. Corporate America has also failed to generate GOP support for the Equality Act, a bill that would codify protections against discrimination for LGBTQ people, and measures to provide a pathway to citizenship for immigrants. illegal immigrant.
âThe Republican Party has become a populist party, largely thanks to Donald trumpDonald TrumpUN meeting with US and France canceled over timing issue Trump sues NYT, Mary Trump for story on tax history McConnell and Shelby propose government finance bill with no debt cap MORE but also because of the presence of what is now the Republican base. And for this very reason, American companies have a lot less influence than before, âsaid Geoff Kabaservice, director of political studies at the Niskanen Center, a right-wing think tank.
“I think they are right to be nervous,” he added, referring to large companies worried about the potential of a default.
While many Republicans, including McConnell, have said no one wants the United States to default on their debt, GOP lawmakers have also expressed confidence that Democrats will take the blame if it happens since they are in control. Congress and the White House.
“If the Democrats don’t do their job, I guess it will be a political backlash for them,” Sen. Rick Scott (R-Fla.), Senate Republicans’ campaign leader, said last week.
Business groups have not called on Republicans to fight for debt limitation, instead urging the two sides to reach a deal. Businesses fear angering Republicans in Congress, who have vowed revenge on businesses that denounced state-level GOP voting laws and Republican attempts to overturn the 2020 election.
Even the Chamber of Commerce, which spends millions of dollars on ads supporting Republican re-election campaigns, has drawn backlash from GOP lawmakers like Sen. Tom’s CottonTom Bryant CottonProgressive foreign policy shouldn’t be pro-autocracy Overnight Defense & National Security – Milley becomes lightning rod Joint Chiefs Chairman Milley becomes right wing lightning rod MORE (Ark.) After endorsing several House Democrats in the 2020 election.
âCorporate America has spoken of a big game not to donate to the campaigns of Republican politicians who voted to overturn the Electoral College result, and yet most of them were ultimately convinced that Republicans will be in the majority afterwards. the 2022 elections, âsays Kabaservice. “On some level, they think Republicans will always support their interests, whether it’s tax cuts or deregulation.”
The United States nearly defaulted on debt in 2011, when Republicans in Congress refused to raise the debt ceiling unless Democrats agreed to cut spending. The spat prompted a company to lower the country’s credit rating.
By increasing or suspending the debt limit, Congress allows the United States to sell more Treasury bonds to pay for expenses already authorized. Raising the limit alone does not authorize new spending, and Congress’ latest deal to suspend the debt ceiling came under the Trump administration.
In addition to disrupting global markets, a default would suspend federal payments through programs like Social Security and Medicare and freeze military salaries. Experts say a default would increase borrowing costs for credit cards, mortgages and auto loans.
A federal default would also hit states and local governments, especially those that provide federal funds to tackle damage from Hurricane Ida.
“No city in America would risk its credit by treating a potential default as an opportunity for partisan play,” National Cities League CEO Clarence Anthony said on Monday. âCongressional leaders and the administration must unite to avoid a default on the national debt. “
secretary of the treasury Janet YellenJanet Louise Yellen McConnell and Shelby propose government funding bill with no debt cap. wrote in a Wall Street Journal editorial on Sunday that a default on US debt would “permanently” weaken the nation.
âThe United States has never failed. Not once. This would likely precipitate a historic financial crisis that would worsen the damage from the lingering public health emergency, âYellen wrote.