It’s déjà vu all over again.  Today Treasury Secretary Janet Yellen warned the United States will be unable to pay its bills on June 1 – unless the debt limit is raised.  Now.

It feels like the Washington summer of 2011. Debt limit politics were hurtling Congress and the White House towards a default for the first time in its history. On August 5 of that summer, Standard & Poor’s, surveying a battlefield of stalemate and brinkmanship, lowered the credit rating of the United States.  It cost US taxpayers tens of billions of dollars in higher interest rate payments. S&P said:

That was then.

American policymaking and political institutions are significantly weaker today.

The debt limit – the number of dollars the overall national debt can reach – is set by Congress by statute.

The amount of debt reflects the money Congress has voted to spend and the tax revenues that are collected.  

In Washington, when Congress refuses to increase the debt limit, it means Congress is refusing to pay for the expenditures it has required the government to spend.  Raising the debt limit means authorising a higher level of national debt to cover spending that has already happened.

The debt limit is like your credit card:  each month, you have to pay back the money you have spent – or you go into default.  

The politics of the debt limit are invidious.  For three decades, Republicans have played “gotcha”: with the debt limit – especially when Democratic presidents are in the White House. 

Why play “gotcha”? To go after those wild-spending, reckless radical Democrats with their out-of-control programs that add to the deficit and bankrupts the country. To get an edge in the next election for control of the House and the Senate.

It does not matter that the currency of debt-limit-gotcha politics is counterfeit – nothing to lose in making the attack.

In 2011, the Republicans demanded, with the debt limit approaching $14.3 trillion, President Obama accept $2 trillion in spending cuts – cuts that would reach deep into Medicare and a host of other domestic programs – in exchange for $800 billion in new revenues.  

It was a searing confrontation.  On August 1, Vice President Joe Biden met with the House Democrats to discuss what was an unholy mess. (I was in the room, and this is recounted in my book with Bryan Marshall, The Committee).  That day, Biden said:

Those “far out guy” numbers among the Republicans in this Congress have doubled.

Last week, with Joe Biden as president, House Republicans voted to raise the debt limit – provided Biden accept their cuts of $4.8 trillion in everything from health care to education to child nutrition to clean energy, and much more.

Joe Biden remembers all the lessons from the closest of calls with default 12 years ago. Those “far out guys” are now the Trump MAGA Republicans with their slash-and-burn agenda and priorities. Biden hated being muscled by them then and he has no intention of surrendering to them now and allowing them to “decimate the social structure” of the United States.

Biden also knows what the Republicans did when Trump was president. Those same Republicans increased the debt limit 3 times, by $7.8 trillion – with no government spending cuts and huge tax cuts that primarily benefited the wealthiest Americans.

Biden is asking the Republicans simply to do what they did for Trump 3 times. They have refused. They were not shocked by the Trump deficits, but the Biden deficits are a catastrophe.

Biden is done playing this game. 

This is why he says he is happy to discuss government taxes and spending until the cows come home – but that raising the debt limit is “not negotiable.”

The current debt limit impasse is more dangerous than the 2011 crisis, for three reasons:

• Republican Speaker McCarthy has told colleagues that the spending cuts passed by the House – by a 1-vote margin – was not a “ceiling” but a “floor” on spending cuts.  In other words, he has no intention of retreating from those cuts. He cannot give them up. As Senate Majority Leader Chuck Schumer has said:

“He’s (McCarthy) stuck. How is he going to negotiate when he’s promised everyone he’s not going to change the bill? … His passing a bill was a step backward and brought us closer to default.”

• A default by the United States is likely to plunge the economy into a recession that will last well into next year.  While Republicans will get the blame for starting it, President Biden will get the blame for not ending it – just as he faces the voters for re-election in 2024.

• There are no guardrails on how radical the Republican mood is. As Norman Ornstein, a leading US political scientist, advised last week:

“Far more than in 2011, a hard core of hard-core extremists in the House would be fine with a default. For many, blowing up government would make the price of economic chaos worth it; for others, the likelihood that a default would be blamed more on the president makes it a tempting ploy.”

President Biden is not going to dismantle his legislative achievements to capitulate to Republican demands to cut spending and cripple his presidency when they rewarded Donald Trump’s uncontrolled fiscal binges.

This crisis is much harder.   Democrats will not give in to the Republicans taking the debt limit hostage and using it to harm the livelihoods of tens of millions of Americans. In the House, McCarthy dare not cut a deal with Biden that fails to get a majority of his caucus to support it. And even if he does reach a deal with Biden, the Republicans in his caucus may well move to oust him.  In the Senate, any deal with Biden has to get the support of no less than 10 Republican votes. Those votes do not exist today.

The alchemy to solve this problem – substantively or procedurally – has not been invented yet.

This calculus means that default is more likely now than at any time in American history.  More likely now than when Biden faced this crisis and spoke to the Democrats 12 years ago.