WASHINGTON — The White House is weighing trying to broker a short-term extension of the debt ceiling to allow more time to pass a larger increase, according to five sources familiar with the matter, a backstop with three weeks until the current deadline in June.
The White House hasn’t endorsed a short-term extension, but officials are keenly aware of the growing risk to markets, businesses and consumers as it barrels toward June 1, the earliest the Treasury says it may no long be able to pay the nation’s bills. The Biden administration’s preference remains a long-term deal, but aides are discussing a variety of fallback options, including invoking the 14th Amendment, to avert an economic catastrophe if a resolution remains out of reach at the end of the month.
“I’m sure one of the things on the table we will have to work through is how long” to raise the debt limit, Shalanda Young, the director of the Office of Management and Budget said Thursday when asked about the possibility about a deal to raise the debt limit through September. “I’m not going to take anything off the table.”
An extension into the fall would provide several months for the parties to negotiate a more fulsome spending deal, two sources familiar with the matter said, and could coincide with the September 30 deadline to agree on the following year’s government funding. According to the U.S. Chamber of Commerce, a short-term extension of the debt ceiling has been enacted six times since 1993 to buy time for a broader package to take shape.
“The White House isn’t necessarily pushing for a shorter-term deal, but they don’t need any more drama and uncertainty in the economy,” said one of the sources, a private-sector executive in regular touch with the administration, who spoke on the condition of anonymity to offer details about internal discussions. “The economy right now is on the edge.”
Despite robust hiring, the U.S. economy grew just 1.1 percent in the first quarter of 2023, leading analysts to suggest a debt ceiling debacle on top of the Federal Reserve’s recent interest rate hikes could trigger a recession, however slight.
The White House Council of Economic Advisors, President Joe Biden’s in-house economic forecasters, published research this week showing the economy would contract 0.3% if the debt ceiling debate pushes right up to the deadline. Two consecutive quarters of negative economic growth are considered a recession, as determined by the National Bureau of Economic Research.
For now, the White House remains committed publicly to its position pushing for a long-term solution and remains open to a two-track process to negotiate spending separately from the debt ceiling.
“This is not our plan,” a White House spokesperson said of a short-term extension. “We are focused on removing the threat of default which will erase our economic progress. As the president has made clear, default is not negotiable.”
Moderate Democrats in Congress have signaled a willingness to vote for a short-term extension — making it an option that could pass through a deeply divided legislative branch. Still, both Republican and Democratic sources acknowledge that D.C. works best on deadlines and that a short-term extension is likely unhelpful unless negotiations between the White House and Congress are more productive.
Any extension would also need Republicans in the Senate, where some have also dismissed the idea.
But the party hasn’t unilaterally been opposed to a longer extension if Republicans get something in return. Rep. Dusty Johnson, a close ally of Speaker Kevin McCarthy and the chair of the moderate Main Street Caucus, pointed to the House-passed bill that included a number of Republican requests to cut spending.
“I think if the White House understands how important it is for us to do things like claw back unobligated Covid funds, not spend $500 billion on an unconstitutional student loan forgiveness, start to unlock American energy,” Johnson tells NBC News, “I think they’re going to find Republicans receptive if the White House understands our values.”