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Stephen Boyd: THE MONDAY BRIEF | February 27, 2023

Stephen Boyd’s weekly Capitol Hill briefing for Alabama’s business, financial, defense and government affairs executives.

After a two-week recess in the House of Representatives, THE MONDAY BRIEF is back with our 10th edition. Thanks for reading. 

The House and Senate both return this week to kick off a lengthy run in which one chamber or the other will be in session 15 of the next 17 weeks. Indeed, today marks the start of the busy season on Capitol Hill—but even as members spend time meeting with constituent groups, attending hearings, and prepping National Defense Authorization Act and appropriations requests, one question percolates in the background more than any other: 

What do we do about the debt limit? 

Let’s take a close look at the biggest legislative issue of the year. To start, three data points emerged while the House was away:

  1. The nonpartisan Congressional Budget Office released its “Budget and Economic Outlook,” which forecasts budget trends for the next ten years. The report includes this gem: “The cumulative total deficit over the 2023–2032 period is $3.1 trillion larger in CBO’s current baseline projections than it was in the agency’s May 2022 projections…” In other words, the U.S.—already deep in the red—will pile up debt in the next decade 20 percent faster than expected.
  2. That same budget office separately announced that an increase to the national debt limit will be necessary sometime between July and September. 
  3. A NPR/PBS/Marist poll released last Thursday describes a public deeply divided on the issue. Registered voters support raising the debt limit, but only by a margin of 52% to 46%. To reduce the debt, half of respondents said they favored cutting programs, but 46% preferred raising taxes. 


How did we get here? How do we fix this? What happens if we don’t? With no clear path ahead, expect rhetoric from both sides. Here are the basics to help make sense of what folks are saying:

  • Unlike about 40 of the states (including Alabama), the federal government is not obligated to balance its budget—and it doesn’t. When annual spending exceeds annual revenue, the result is a deficit. That’s happened for about 45 of the last 50 years. 
  • Add up a string of deficits and you have the national debt—which, as of this morning, sits at about $31,582,496,256,425, or $246,867 per taxpayer.  
  • The problem is not new, but it has gotten MUCH worse in the last 20 years. 

Outstanding Historical Debt


  • The debt is a bipartisan problem, and both parties are guilty of deficit spending—often on popular programs. For example, at least $400 billion in new deficit spending identified in the CBO report results from a bipartisan bill passed last year to provide care to veterans exposed to trash burn pits on military bases.
  • Federal law caps how much debt the government may accrue, but Congress and the President have changed the law to increase (or suspend) the limit more than 100 times. 

Why debt matters: additional debt drives inflation, increases the share of annual spending that must go to cover interest payments, and crowds out investment in major domestic programs like rebuilding American infrastructure. 

Why a default would matter: Raising the debt ceiling allows the government to pay for expenditures already incurred, and failure to do so would result in a default that could, in the words of Treasury Secretary Janet Yellen, cause: 

“…our borrowing costs [to] increase and every American [to] see that their borrowing costs would increase as well. . . . On top of that, a failure to make payments that are due . . . would undoubtedly cause a recession in the US economy and could cause a global financial crisis. . . . It would certainly undermine the role of the dollar as a reserve currency that is used in transactions all over the world. And Americans – many people would lose their jobs and certainly their borrowing costs would rise.”

This is Washington, so behind the numbers and near-term economic threats, big league politics are at play. As the great economist Thomas Sowell wrote a dozen years ago:

“The one thing that the national debt-ceiling has never done is to put a ceiling on the rising national debt. Time and time again, for years on end, the national debt-ceiling has been raised whenever the national debt gets near whatever the current ceiling might be. Regardless of what it is supposed to do, what the national debt-ceiling actually does is enable any administration to get all the political benefits of runaway spending for the benefit of their favorite constituencies – and then invite the opposition party to share the blame, by either raising the national debt ceiling, or by voting for unpopular cutbacks in spending or increases in taxes.”

Status Today

The U.S. technically exceeded the debt limit in January, but the Treasury Department has been using temporary “extraordinary measures,” akin to paying some bills but not others, to buy time for a solution. Those steps expire this summer. Because Congress is traditionally on recess in August, the smart money is on a vote in late July—but that could shift.

Politics & Policy 

The next few weeks are more about staking out positions in preparation for the deal-making to come. The general positions of the key players:

  • Senate Republican Leader Mitch McConnell: “Periodically the debt ceiling has to be lifted and it’s always a rather contentious effort . . . In the end, I think the important thing to remember is America must never default on its debt. It never has and never will.” For now, McConnell is letting the Administration and House Republicans take the lead in talks.
  • President Biden wants a “clean” increase to the debt limit:  “I will not let anyone use the full faith and credit of the United States as a bargaining chip.” Congressional Democrats will follow that lead—to a point. 
  • House Speaker Kevin McCarthy has rejected the idea of a “clean” increase, and his Republican conference seems to be coalescing around the view that, if the debt limit must be raised, it should also include cuts to future spending. 

Protected Programs & Budget Realities

The situation today has striking parallels to 2011, when the Budget Control Act was passed to raise the debt ceiling and impose strict cost saving measures that eventually took the form of “sequestration.” The questions then, like today, were: “Where do we cut? And how much?”

Though some initially pointed to entitlement reforms for cost savings, the realities of the third rail of politics—cutting Social Security and Medicare benefits—sunk in, and those programs seem to be off the table. Also, in the face of heightened Russian and Chinese aggression, many House Republicans believe the defense budget should be protected at all costs. 

Reasonable people may differ on policy, but everyone is subject to the same rules of arithmetic. That’s where this gets difficult. A (very) simplified example: 

Assume Congress increases the debt limit by $1.5 trillion, but insists on a dollar-for-dollar reduction in future spending. That would equate to $1.5 trillion in cuts over ten years, or $150 billion per year. 

$150 billion cut from a $6.3 trillion annual budget seems easy enough—until you start exempting broad categories from cuts. First, about 8% of future spending must go to interest payments on the existing debt. Second, about 63% of the budget is entitlement spending: citizens are legally entitled to the program’s benefit if they meet certain criteria in the law. Because it’s mandatory, Congress can’t just cap spending on these programs it in a budgetary sense. The only way to save money on most entitlement programs is to take a politically difficult vote to reduce benefits.   

That leaves roughly 30% of the budget known as discretionary spending, a bit less than half of which goes to the Department of Defense—also exempted. 

What’s left is about 15% of the budget—$945 billion in this example—that remains eligible to absorb $150 billion in cuts. And that remaining slice of the pie covers most of what Americans associate with the federal government: the court system, law enforcement, border control, education grants, USDA programs, and so on. Slashing budgets so sharply each year for a decade would indeed yield savings, but would also have profound implications on a wide range of government programs. And, because the current Congress can’t bind a future Congress, future politicians could later remove the cuts when the reductions in government services become a political problem. 

What’s Next?

  • Congress usually acts right before a deadline, and this will be no different. This is the exploratory stage. The real negotiations haven’t started.
  • A “clean” increase to the debt ceiling seems unlikely, but the solution may involve a creative, multi-part solution rather than a straightforward “yes” or “no” vote.
  • Watch out for efforts to protect Social Security and Medicare, but put Medicaid on the chopping block. 
  • If negotiations between the House and the Administration drag on, Senate dealmakers will get involved. 

Fly In Update…

As noted, the busy season on the Hill starts today, and each week this Spring will brings thousands to Washington to attend national conferences.  Organizers often send their conferees to the Hill to meet with lawmakers and discuss legislative issues. We’ll highlight “fly-in” info here because it’s of interest to members, staff, advocates, and stakeholders.

  • CREDIT UNIONS—More than a hundred credit union advocates from Alabama will be in Washington this week as part of the Credit Union National Association’s annual Government Affairs Conference. This year’s conference is expected to have more than 5,000 in attendance. The Alabama group, which represents more than 2.2 million credit union members across the state, plans to visit with Alabama’s congressional delegation to discuss the importance of overdraft services, proposed credit card routing mandates, oversight of the Consumer Financial Protection Bureau, and other issues of importance to credit unions and their members. The group will be led by Grace Newcombe, Senior Director of Federal Advocacy at the League of Southeastern Credit Unions & Affiliates. 
  • ALABAMA TOURISM PARTNERSHIP—The Alabama Tourism Partnership, a consortium of state-wide agencies in Alabama, is already planning a trip to Capitol Hill this summer. In conjunction with the Southeast Tourism Society, the group will be setting up meetings with Alabama’s congressional delegation in July. More info on the legislative and policy agenda of those meetings as the trip gets closer. 

Headed to the Hill this Spring? Let us know and we’ll post it here. 

Stephen E. Boyd is a Partner at Horizons Global Solutions. Previously, he served as a Senate-confirmed Assistant Attorney General at the U.S. Department of Justice, Chief of Staff for Alabama members in both the U.S. Senate and U.S. House of Representatives, and as a Communications Director of the Senate Committee on the Judiciary. He resides in the Washington, D.C. area. Opinions expressed herein are his own. This news report is not intended to influence or persuade. Email Stephen at [email protected].


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