To date, Biden has refused to negotiate on the debt ceiling, for two reasons: first, there was no House GOP proposal to consider, and he wasn’t going to bargain with himself; and second, as a matter of principle, paying existing debts should be an unconditional obligation, not an opportunity for extortion. That was the appropriate response at the time.
As of this afternoon, however, we finally have a ransom note, albeit one that only passed with two votes to spare. So what does Biden do now? He has three choices:
- Continue to refuse to negotiate, and hope a handful of GOP House members fold out of electoral self-interest at the last minute;
- Rely on the 14th Amendment or the minting of the platinum coin if it becomes clear a bargain cannot be reached days before the deadline; or
- Bash the GOP in public, but empower a group of centrists to work out a face-saving deal behind the scenes.
In my opinion, Option #1 is not worth the risks, as Trump will be the only beneficiary if there is a default, and dividing the GOP on this issue won’t really impact the presidential election. I personally support #2, but Biden hasn’t shown much interest in it as of today, partly because it will make the markets uneasy. That leaves #3. My guess is that we will ultimately have a deal that includes a commitment to create some sort of bipartisan entitlements and deficit commission, the clawing back of unspent pandemic money, and a few other minor items that won’t move the needle one way or the other.