Updated October 6, 2021, 6:25 p.m. ET
Senate leaders are working to finalize a deal to avoid the immediate threat of a federal default by postponing a political battle until December.
Democrats say they are ready to accept an offer from Senate Minority Leader Mitch McConnell, R-Ky., For a short-term lifting of the debt limit. But they say they remain reluctant to accept a related request to use McConnell’s preferred procedure to adopt a longer suspension of the borrowing limit.
Senate Budget Committee Chairman Bernie Sanders, I-Vt., Told reporters on Capitol Hill Democrats wanted to avoid the default and viewed the offer as a Republicans retreat.
“They have finally done the right thing and at least we now have a few months to get another permanent solution,” Sanders said, before adding, “There will be no reconciliation.”
Democrats and Republicans have spent months entrenched in a battle over the exact process to set the borrowing limit despite the looming threat of a federal default. The fight has left the two sides very divided on how to find a long-term solution to the reality that they must grapple with the limit in order for the government to continue paying off debts already incurred.
If they fail, the rating agencies could degrade the country’s reputation. Such a move could seriously damage an already volatile market, drive up lending rates for ordinary citizens, and significantly hurt investment funds, like 401 (k) pension plans.
The way forward hinges on a McConnell proposal for Republicans to stand on the sidelines and allow Democrats to shift the increase in the short-term debt limit to a “fixed dollar amount” that would last until the end of the day. ‘in December.
“This will take away the Democrats’ apologies for the time crunch they have created and give the United Democratic government more than enough time to pass stand-alone debt-limiting legislation through reconciliation.” McConnell said in a statement.
The possibility of a deal blocked progress on a planned vote on a bill to suspend the debt ceiling until December 2022. The bill, which was part of an effort to lobby Republicans to get a concession remains a backup option.
The legislation has already passed the House, but it takes 60 votes in the Senate to overcome a GOP obstruction.
The standoff turned into a weeks-long drama which Senate Majority Leader Chuck Schumer, DN.Y., blamed entirely on McConnell.
“For months, Leader McConnell and Senate Republicans insisted they wanted a debt ceiling solution, but only if Democrats did all the work themselves,” Schumer said in a speech delivered before the Senate. “We have already offered plenty of opportunities for Republicans to do what they say they want – including offering simple majority voting so Democrats can hang the debt ceiling on our own like Republicans have. asked – but every time the Republicans have chosen obstruction and unfortunately kept us on the default path. ”
The default deadline is quickly approaching, no matter who is to blame for the ongoing battle.
Treasury Secretary Janet Yellen has set a deadline October 18 for Congress to act, or the agency may not be able to pay its bills. Yellen warned that child tax credits, Social Security benefits and military paychecks are all at risk if this political stalemate continues.
“Not raising the debt ceiling would have catastrophic economic consequences,” the Treasury Department said. noted. “It would cause the government to breach its legal obligations – an unprecedented event in American history. It would precipitate another financial crisis and threaten the jobs and economies of ordinary Americans – putting the United States back into a deep economic hole,” just as the country is recovering from the recent recession. ”
Democrats had limited options
Democrats had at least two options to raise the debt ceiling with a simple majority vote.
Budget reconciliation, which Senate Democrats already plan to use to pass President Biden’s “human infrastructure” priorities, is a process that allows lawmakers to pass a bill by a simple majority.
McConnell insisted that it should be easy for Democrats to apply this process to debt, no matter how long and how complex.
Senate Democrats are expected to advance a budget resolution first, submit to an a-rama vote where additional Senate amendments are considered, wait for the House to pass its own reconciliation passage, and then pass the legislation.
On Monday, Biden called the reconciliation “an incredibly complicated and cumbersome process.”
Schumer told reporters on Tuesday he was not interested in using reconciliation, which he called “a long, convoluted and risky process.”
More nuclear talk
The second option to move forward with a simple majority vote? Get rid of legislative obstruction. But that path is also difficult, with at least two Democratic senators – Joe Manchin of West Virginia and Kyrsten Sinema of Arizona – staunchly opposed to removing the filibuster.
While there have been conversations about an “exclusion” from the filibuster rule for the debt ceiling, the reality is that once the filibuster is dismantled, it is dismantled.
This goes back to the days when the systematic obstruction had already been eliminated. for judicial candidates, an action that ultimately led to the elimination of filibuster for Supreme Court candidates.