Experts are counting down the deadline for Congress to come up with a debt ceiling solution so the US can stay solvent and pay its bills.
LEILA FADEL, presenter.
We know the US is running out to pay its bills. What we don’t know is when that will happen, or, in other words, what Congress’s deadline is for a resolution on the debt limit. Nick Fountain from our Planet Money podcast caught up with some policy experts trying to figure out that exact detail.
NICK FOUNTAIN, BYLINE. The Wonks are at the center of Bipartisan politics, and they’re led by Shai Akabas, who doesn’t really like to brag about his experience.
Shai Akabas: Being the world’s expert on debt limits is a bit like being the world’s expert on termites. Nobody really wants to…
AKABAS: …See you around or hear from you.
The fountain. He has been doing it for some time. Beginning in 2011, the debt ceiling battle has many parallels today. At the time, now-Federal Reserve Chairman Jay Powell was working with Akabas, and Akabas says Powell understood that Republicans did not trust the information the Treasury Department was releasing about the debt ceiling, especially this detail when the Treasury could remain without money
AKABAS: Rightly or wrongly, they were seen as an unbiased source of the fundamentals of the debt limit and what they required Congress to do.
The fountain. Akabas and Powell thought, maybe we could be the objective source. Worth a shot. The first piece of information they needed for the audit was the date when the US could end up paying its obligations, which they called the X Date. Akabas and Powell examined months of Treasury statements to try to figure out the US government’s cash flow. And they calculated that the US could run out of money on August 2nd for up to 35 days. They then headed to Capitol Hill to try to answer any questions lawmakers had as…
AKABAS: Why should we act? Couldn’t we do that? Or could we not do it? Or couldn’t we, you know, go over the cliff and see what happens?
The fountain. And they would tell lawmakers, the truth is, nobody knows for sure what’s going to happen when we go off that cliff.
AKABAS: Grave unknown beyond X date. We’ve never been there in our country’s recent history, and we just don’t know what the reaction will be to that action.
The fountain. But they would say that the consequences could be dire. The US debt market is basically the foundation of all other financial markets. If the debt ceiling impasse lasted more than a few days, think about financial market crashes, increased borrowing costs, and a downgrade in the US credit rating. And all for what? Negotiate a few extra days? It is not worth it. The culmination of their lobbying efforts came just two weeks before that year’s X Date. Powell was invited to a closed-door meeting of the entire Republican caucus. Akabas wasn’t, but he heard some stories.
AKABAS: I was told that someone shouted. I was told that there may have been some expressions (laughter).
The fountain. It was in that room, he says, that Republicans hammered out a deal they would eventually negotiate with the White House.
When was the deal made? Remember how close August 2nd is to X date?
AKABAS: I believe the deal was made on August 2nd. So it was a last minute deal.
AKABAS: Congress really only tends to act when its back is against the wall.
Fountain: Seriously. I thought reporters liked deadlines, but wow!
AKABAS: Congress really likes deadlines.
The fountain. That was true in 2011, and it will likely be true this year. Akabas and his team will release their forecast for this year’s X date later this week.
Nick Fountain, NPR News.
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