Debt limit may be biggest test for House Speaker Paul Ryan's leadership

— -- While lawmakers enjoy a five-week summer recess, House Speaker Paul Ryan is preparing to face perhaps his speakership’s toughest challenge to date: increasing the country’s debt limit.

When they return to the Capitol after Labor Day, there will be just 12 working days for Congress to raise the debt ceiling before a deadline at the end of September to avert a first-ever default on the country’s loan payments.

Now it comes down to Congress to stop the possible financial crisis in its tracks before the deadline.

The GOP is facing an internal battle between moderates and conservatives, and any solution will almost certainly need support from Democrats.

A major pivot for Ryan?

Now that Republicans have control of the big three — the House, the Senate and the White House — if the GOP has decided to pursue the route of a clean debt ceiling increase — without requiring spending cuts — that would be a major policy shift.

In 2011, Ryan, then the chairman of the House Budget Committee, took a hard line during the debt ceiling debate, leading House Republicans in a standoff against President Obama and Senate Democrats.

Republicans, who had just taken control of the House, warned that Congress shouldn’t raise the government’s borrowing limit without making corresponding cuts to federal spending because government was adding too much to the country’s credit card tab.

At the time, the annual deficit was projected to peak at a record $1.5 trillion, primarily due to the Great Recession and the stimulus package enacted by a Democratic-controlled Congress and Obama in 2009.

Ryan’s calls for cuts in federal spending rang loud and clear for months leading up to the debt ceiling deadline, saying in one televised interview, “We got to have a down payment on the debt and deficit, and what we are saying is, for every dollar you want to raise the debt limit, just cut more than a dollar’s worth of spending. It is not too much to ask.”

Efforts to raise the debt ceiling amid divided power in Washington stalled as Republicans pressured Democrats to make cuts to federal programs, such as Medicare and Social Security. Liberals, led by House Minority Leader Nancy Pelosi, insisted on a clean increase at the time.

In the end, Democrats and Republicans finally agreed on the Budget Control Act of 2011, which cut spending by approximately $917 billion over a decade and raised the debt ceiling by $900 billion. It also set up the so-called supercommittee, which had a mandate to cut up to $1.5 trillion more in spending while raising the debt ceiling an additional $1.2 trillion. If the bipartisan, bicameral panel failed, automatic spending cuts split between defense and domestic spending would take hold, called sequestration.

The supercommittee’s efforts ended in a disastrous stalemate and left lawmakers grappling with sequestration. The bitter battle also led to a downgrade of the nation’s credit rating.

This time around, Ryan said he will defer to Treasury Secretary Steven Mnuchin.

“Naturally, the treasury secretary should be in charge of the debt limit because it’s the treasury secretary who runs the numbers, who runs the levers that control the flow of us paying our debts,” Ryan, R-Wis., said last month. “We’re going to work with [Treasury] on this. We’re having long, ongoing conversations with our members about how to address this, and we’ll address it before we hit the debt limit.”

“I’m not going to negotiate with myself in the media,” Ryan protested when pressed for details on his strategy. “We’re going to have these kinds of conversations with our members and find the best way forward. We’ll come up with a solution.”

What could go wrong?

The Treasury Department is warning Congress that failing to raise the debt ceiling next month could force the agency to stop, limit or delay payments on a broad range of legal obligations, including entitlement benefits, interest payments, military salaries and tax refunds. Failure to act could trigger a devastating recession resulting in the loss of millions of American jobs, lead to a stock market crash and cause global financial chaos.

In March, Mnuchin wrote to members of Congress to announce “extraordinary measures” the department was utilizing in order to temporarily prevent the U.S. from defaulting on its loans, since the debt limit established under the Bipartisan Budget Act of 2015 had expired.

In July, Mnuchin announced that the Treasury would extend those extraordinary measures until Sept. 29.

Who wants what?

The Trump administration, especially Mnuchin, is urging lawmakers to raise the $19.8 trillion debt limit with no strings attached.

GOP insiders privately admit there’s nothing the House can pass without Democratic votes. The Senate poses a steeper challenge because the debt limit is subject to the 60-vote threshold to avoid a filibuster.

Senate Majority Leader Mitch McConnell has signaled a willingness to work with Democrats in Congress to secure a debt limit increase.

“We are looking for a way forward” to pass a debt limit increase “sometime in the next month or so,” he announced after a meeting with Mnuchin and Senate Minority Leader Chuck Schumer at the Capitol on Aug. 1.

As Republican congressional leaders reportedly prepare to pass a clean debt ceiling increase when Congress returns from recess, rank-and-file conservatives and even some moderates oppose the idea.

“Most Republicans want to do something to lower the trajectory of the debt,” Rep. Tom Cole, R-Okla., said on MSNBC’s “Morning Joe” today. “I mean, a clean debt ceiling hike is like having a credit card and saying, ‘I’ve reached my limit. I just am going to change the limit higher without changing any of my spending habits.’ That’s a tough sell to Republicans. Democrats seem to be fine with that, but I think most of my colleagues aren’t.”

In addition to raising the debt ceiling, Congress must pass a spending bill by the end of September or face a government shutdown. The similar deadlines have opened a window for major haggling between lawmakers on these key fiscal issues.

Some conservative Republicans support a debt ceiling increase only with the inclusion of budget-reducing cuts to federal spending on entitlement programs, such as Social Security and Medicare. But there is also concern that their party’s credibility could be tarnished if they don’t move swiftly to raise the debt ceiling next month.

“The debt ceiling needs to be raised,” Rep. Mark Walker, the chairman of the Republican Study Committee, wrote in an op-ed in The Washington Examiner. “Nobody is advocating for a course of action that risks a fiscal crisis for the country. But the debt ceiling increase needs to be accompanied by reforms to address the problems that cause it. We can’t afford to kick this can down the road. Otherwise, Republicans lose credibility the next time we point out (as we often do) that the national debt is a serious problem.”

Dozens of conservatives successfully campaigned on as much, and scores of Republicans balked at the idea of a clean increase in years past — leading to other bipartisan deals.

The House Freedom Caucus announced in May that it opposes an increase of the debt ceiling without cuts to the 2018 budget and vowed to oppose whatever leadership comes up with unless its demands are met.

In a statement Monday, Heritage Action, a conservative policy advocacy group, warned, “Our nation’s structural deficit is driven by historically irresponsible levels of federal spending. Any increase in our nation’s debt ceiling should be paired with serious spending reforms that begin reducing federal spending in real, meaningful ways. Congress cannot simply kick the can down the road to the next generation; instead they should work with the administration to raise the debt ceiling in a responsible way that addresses our nation’s serious fiscal challenges.”

Soon: A $20 trillion national debt

In 2011, the national debt — approaching $15 trillion that September — was a key factor in the debate. The next year, the GOP put the National Debt Clock up on a digital scoreboard inside the arena at the 2012 Republican National Convention in Tampa.

Six years later, the debt is climbing over $19.97 trillion. With a country that is nearly $5 trillion deeper in debt despite GOP control over spending, the policy shift brings an unprecedented challenge to Ryan’s leadership: Does he side with the White House or the House GOP conference he leads?

If history is any indication, Ryan should look no farther than his immediate predecessor, John Boehner, who called it quits as speaker in 2015 after facing mounting pressure from members of his party for failing to advance perilous policy issues favored by the GOP conference’s most conservative members.

“When you’re the speaker of the House, your No. 1 responsibility is to the institution,” Boehner said during a news conference announcing his resignation, acknowledging that a possible vote to remove him as speaker, pushed by conservatives, would hurt the establishment.

Ryan’s speakership may be on the line as wary conservatives watch his next move.