Opinion: Why big business must confront Congress over the debt ceiling crisis
Recent reports that House Republicans intend to resist raising, or suspending, the country’s debt limit—and instead pursue legislation that would force the Treasury Department to prioritize certain payments—should galvanize market leaders to action.
This is not a drill. Such a scenario would represent a default and would put the economy at serious risk. That’s why a sustained campaign is needed to appeal to persuadable Republican members of Congress.
It’s understandable that businesses and financial institutions may be hesitant to engage.
The new House Republican majority is, to state the obvious, a little different from the country club Republicans of the Bush era. Businesses, for example, are already being forced to grapple with this new reality on a host of fronts, including corporate diversity efforts and ESG policies. Many in the largely center-right business world may wonder why they should add the debt ceiling to an already full plate. Doesn’t this fight always end the same way anyway?
But to think that way —and fail to engage in a serious campaign to have the debt ceiling lifted or suspended—would be a miscalculation with potentially grave financial consequences.
What’s different today, and what should compel market participants to become engaged in a big way, only requires a quick examination of recent history. When I began serving as a staffer in Congress in 2009, the GOP was generally split in two:. There were the “regulars,” low tax, free trade, small government Republicans who recognized that country always came first when it truly mattered. And then there were “ultras,” those who actually believed the stuff the late Rush Limbaugh and other right wing talk radio hosts said each day.
Even among the ultras, there was an important distinction between those who believed right wing orthodoxy in their bones—and those who just pretended they did to get ahead. They could, back in the day, conceivably be counted on to do the right thing when push came to shove.
But slowly but surely, over my time in Congress, the regulars left due to a mix of age and frustration. They were replaced by the ultras, with nary a pretender among them. Today’s House Republican conference is run by that clique and the small caucus of regulars live in fear —both political and physical — over the consequences of crossing them.
It’s this current dynamic that should inspire financial institutions, larger corporations, and center-right stakeholders to engage in an unprecedented campaign to have the debt ceiling raised or suspended.
Market participants and economic stakeholders must make this clear to the reasonable Republicans in Congress, who they still have influence over: flirting with a debt ceiling breach is a wholly and completely unacceptable act that will result in an end to any and all political support.
Playing with the debt ceiling must be viewed as the financial equivalent of the January 6th insurrection. And instead of backtracking, as far too many corporate actors did following the Trump insurrection, there should be no wiggle room on this issue. Furthermore, corporate America should state clearly that failing to support an increase in or suspension of the debt ceiling will not only result in a permanent loss of political support, but will result in active support for candidates willing to do right by America and vote to raise or suspend the debt ceiling.
Having corporate America draw a hard line in the sand is the only option given the stakes and paucity of solutions. The most recent jobs report, showing 223,000 jobs created in the month of December, and new inflation data showing a slowing of inflation, both serve as evidence that the Biden Administration’s push for an era of steady, stable growth is becoming a reality.
President Biden’s economic policy, combined with the efforts of the Federal Reserve, are moving the U.S. economy closer to a so-called “soft landing” and a sustainable future at a quicker pace than many thought possible. All of that — along with the entire COVID-19 economic recovery — is at stake if the debt ceiling is breached and America defaults.
Peeling back the progress made since the pandemic started would be a significant blow. Failing to pay Social Security recipients their benefits would also represent a serious problem. But breaching the debt ceiling opens the U.S. up to an even greater cataclysm. Our nation, which underpins the global economy, would no longer be viewed as trustworthy. Why, for instance, would market participants continue to buy U.S. debt if the full faith and credit of the government is in question?
Enduring a self-inflicted economic Stone Age is too great a risk for market participants to just sit on the sidelines.
While an economic soft landing is very much in play, there’s no such soft landing for Republicans who are skittish about crossing the ultras and raising the debt ceiling. During my time in Congress, there was often a bipartisan recognition of what needed to be done. Many debates on the Democratic side of the aisle revolved around giving Republicans a politically palatable pathway to do the thing that needed to be done.
There’s no halfway solution here and very little in the way of legislative cloak and dagger available. The debt ceiling simply needs to be raised or suspended.
This political rock-and-hard-place should be another element of this debate that prompts corporate America to engage heartily in this effort — They can’t count on legislative wizardry or executive maneuvering. There are policy issues that simply require members of Congress to do difficult things. The debt ceiling is one of them.
Democrats, as they did during the Trump administration, will supply sufficient votes to raise or suspend the debt ceiling. It’s incumbent on Republicans to provide their share of the votes and for those with influence over them to give them no choice but to do so as well.
John Rizzo is a senior vice president of public affairs with Washington D.C.-based Clyde Group. He has also been a Treasury Department spokesperson and a top communications adviser to Sen. Chuck Schumer (D-NY)