A partisan standoff in Congress over raising the U.S. government’s debt ceiling threatens the federal government’s credit rating and the global economy.
Republicans want big-spending Democrats to act to raise the limit themselves, while Democrats accuse Republicans of playing political games and say that the debt ceiling should not be a partisan issue.
Here is a breakdown of the debt ceiling fight in Congress:
DEADLINE: Treasury Secretary Janet Yellen said in a letter to congressional leaders last week that unless Congress acts to raise or suspend the debt limit by Oct. 18, the federal government may not be able to meet its financial obligations. She warned that the date estimate can “unpredictably shift forward or backward.”
Importantly, new debt must be accrued in order to pay for obligations that have already been legally obligated, not necessarily to pay for pending legislation that Congress is considering.
CONSEQUENCES: If the debt ceiling is hit and the government runs out of cash on hand, the government will default on its obligations at least temporarily. Social Security payments, government employee paychecks, veteran benefit payments, and more could be halted.
That would have substantial effects on financial markets worldwide. On Tuesday, Yellen warned that breaching the debt ceiling could trigger a recession. A Moody’s Analytics analyst projected that the effect would be similar to that of the 2008 recession, triggering a loss of 6 million jobs worldwide, reducing gross national product by 4%, and surging the unemployment rate to 9%.
Acting in a timely manner is also important. In her letter to Congress, Yellen warned that “waiting until the last minute can cause serious harm to business and consumer confidence, raise borrowing costs for taxpayers, and negatively impact the credit rating of the United States for years to come.”
“We’re in the danger zone right now,” Virginia Democratic Sen. Mark Warner told reporters Tuesday.
ACTION SO FAR: Republicans shot down efforts to raise the debt ceiling twice and are on track to do so a third time on Wednesday.
On Sept. 27, Republicans blocked a short-term government funding bill because it included a debt ceiling increase.
On Sept. 28, Schumer sought unanimous consent to lower the voting threshold for a stand-alone debt ceiling bill to 50 votes. Senate Minority Leader Mitch McConnel blocked that, as well.
On Wednesday, the Senate is set to vote on a stand-alone measure that has already passed that House that would suspend the debt limit through December 2022. It needs 60 votes to advance, and Republicans say they will block the measure.
REPUBLICAN STANCE: McConnell warned Democrats for months that Republicans will vote against raising the debt ceiling as long as Democrats pursue their sweeping budget reconciliation bill, originally proposed to cost $3.5 trillion over 10 years. The reconciliation bill framework, which is still being negotiated, includes a number of provisions such as mandating paid family and medical leave, creating a “civilian climate corps,” raising the corporate income tax and capital gains tax rates, and adding dental and vision coverage to Medicare benefits.
Because Republicans will not support the legislation, Democrats are moving the bill through a special budget reconciliation process that allows the Senate to bypass the Senate’s filibuster cloture rule. Instead of needing support from 10 Senate Republicans, Democrats just need all 50 of those voting with their caucus, plus Vice President Kamala Harris as a tiebreaker.
McConnell wants Democrats to use the same reconciliation process to raise the debt ceiling.
“If they want to tax, borrow, and spend historic sums of money without our input, they’ll have to raise the debt limit without our help,” McConnell said on the Senate floor last month.
Republicans don’t want the government to breach the debt limit — they just want to force Democrats to raise it themselves. In a letter to President Joe Biden on Monday, McConnell urged Biden to tell Senate Democrats to use the reconciliation process to raise the debt limit.
DEMOCRATIC STANCE: Top Democrats argue that the debt ceiling has been bipartisan in the past and that there is no reason to risk the nation’s full faith and credit.
“Raising the debt limit is usually a bipartisan undertaking. And it should be,” Biden said in a speech Monday pressing Republicans to cooperate with the debt ceiling hike.
Republicans rebut that Democrats have used their same argument during previous debt limit fights in 2003, 2004, and 2006, during which time Biden himself argued that he did not want the country to default but that the president’s majority party should raise the debt limit alone.
If Democrats raise the debt ceiling through reconciliation, they would be required to set a new number for the debt limit. Suspending the debt ceiling until December 2022 through the normal process does not require them to set a new hard borrowing limit.
Democrats claim that there is not enough time at this point to start another reconciliation process to pass a stand-alone debt limit increase before the Oct. 18 deadline. That process, they claim, could take two weeks or more. Republicans are skeptical of that timeline.
Another downside of the reconciliation process for Democrats is that it would trigger an hourslong “vote-a-rama” session on amendments that need only 51 votes to pass — but which are usually nonbinding and only votes to force senators to take a stance on hot-button issues. Previous “vote-a-rama” sessions this year have stretched into the wee hours of the morning.
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“That would require literally up to hundreds of votes,” Biden said when asked about raising the debt ceiling through reconciliation. “It’s fraught with all kinds of potential danger for a miscalculation, and it would have to happen twice. … It’s an incredibly complicated, cumbersome process.”
Senate Democratic leaders have called raising the debt ceiling through reconciliation a “nonstarter.” They hope that 10 Republicans will crack and ultimately allow the debt ceiling suspension to proceed.
