The debt ceiling needs to be raised or suspended in the coming weeks, and some lawmakers had hoped that the budget blueprint released Monday would do just that, with Democrats including a provision to address the issue before the Treasury has trouble paying its bills sometime this fall.
However, the budget resolution makes no mention of the pressing issue, setting the stage for a showdown between Democrats and Republicans that could have serious repercussions for the country’s credit rating, as well as the stability of international financial markets and the global economy.
On Monday, Treasury Secretary Janet Yellen called for bipartisan cooperation to raise the debt ceiling. “As I said in my letter to Congress on July 23rd, increasing or suspending the debt limit does not increase government spending, nor does it authorize spending for future budget proposals; it simply allows Treasury to pay for previously enacted expenditures,” Yellen said in a letter to Congress. “Failure to meet those obligations would cause irreparable harm to the U.S. economy and the livelihoods of all Americans.”
But Republicans have made it clear that they oppose raising the debt limit in the absence of spending reforms. “We’ve seen that movie before, but we’ve never seen anything quite this dramatic,” Sen. John Cornyn (R-TX) said as he laid out his party’s stance on the issue. “They want to spend $3.5 trillion more; I don’t think it’s unreasonable to say they have to raise the debt ceiling themselves. And then bear the responsibility for it.”
Sen. Minority Leader Mitch McConnell (R-KY) made the same point while doubling down on the GOP position. “Here’s the comedy, they won’t let Republicans have any say in this monstrosity but they want our help raising their credit card to make it happen,” he said.
What happens next: Democrats could amend their budget resolution to include a provision raising the debt ceiling. Alternatively, they could include a provision in a must-pass piece of legislation such as a bill to provide short-term funding to keep the government open in the new fiscal year, which starts on October 1.
Whatever path Democrats choose, the battle over the debt ceiling could grow quite tense in the coming weeks. “Democrats and Republicans are now headed for a classic political game of chicken, knowing that the nation will default on its $28 trillion in loans without quick action — a calamitous outcome that has never before occurred in U.S. history,” Politico’s Caitlin Emma and Jennifer Scholtes wrote last week.