Congress Careeens Toward a Shutdown
It sure looks like we’re heading for a crisis.
The House is set to vote this evening on a stopgap government
funding bill that would also suspend the federal borrowing limit
through December 16, 2022 and provide money for disaster relief and
resettling Afghan evacuees — but the legislation is likely doomed
in the Senate, where Republican votes would be needed for it to
pass.
Republicans insist they won’t help raise the debt ceiling
because they oppose Democrats’ proposed $3.5 trillion package of
social welfare spending and tax hikes on corporations and the
wealthy. “They have the capacity to raise the debt ceiling by
themselves, just like the capacity they have to spend money by
themselves. So we're not going to help them do either one," Sen.
Mitt Romney (R-UT)
said Monday night.
That leaves it entirely unclear whether lawmakers will be able
to prevent a government shutdown in 10 days or avoid a potentially
calamitous debt default next month.
Democrats opted to link the suspension of the debt limit with an
extension of funding for the federal government through December 3,
essentially daring Republicans to oppose the whole package,
including $28.6 billion in hurricane and wildfire relief, and bring
federal operations to a halt.
“We know the Republican justification for forcing a default is
totally dishonest, plain and simple,” Senate Majority Leader Chuck
Schumer (D-NY) said Tuesday on the Senate floor. “Playing games
with the debt ceiling is playing with fire and putting it on the
back of the American people.”
Republicans have given no indication that they’ll back down,
though — and Democrats have given little indication that they’ve
got a fallback plan ready to go. They can still unilaterally raise
the debt limit by adding an increase to their budget reconciliation
package, though the process would take time and Democratic leaders
have steered away from this option so far.
“In recent days, Democratic lawmakers have reassured they will
not allow the country to default. Some have said they could
ultimately take special legislative maneuvers to bypass the
Republican blockade and adopt the debt ceiling increase on their
own,” The Washington Post’s Tony Romm
writes. “But the process could take days that
Democrats simply do not have, meaning at least a partial or
short-term government shutdown is possible even if Congress staves
off a more apocalyptic financial meltdown.”
Hoyer says bipartisan infrastructure bill will get a vote
next week: House Majority Leader Steny Hoyer (D-MD) told
reporters Tuesday that the Senate’s $1 trillion bipartisan
infrastructure bill will indeed be brought up for a vote next week,
even though Democrats’ larger budget reconciliation bill won’t be
ready by then. “This is a huge win for moderates in both chambers,”
Politico’s Playbook PM
notes. “That effectively
decouples the two bills, officially spiking the
so-called ‘two-track’ process that leadership hoped would enable
passage of both while keeping the party united.”
Dozens of progressives say they won’t support the infrastructure
bill without the reconciliation bill, as they try to maintain some
leverage to force moderates to support the larger package. And
House Republicans likely won’t provide many votes for the
infrastructure bill, either. “It will not pass,” Rep.
Pramila Jayapal (D-WA), chair of the Congressional
Progressive Caucus, said of the infrastructure bill Monday,
according to Punchbowl News. “The two have to go together. That was
the deal made in the Senate. That was why the progressive senators
voted for the infrastructure bill.”
Democrats cut Iron Dome funding from their bill: In
another sign of the divisions between Democratic moderates and
progressives, House Democrats on Tuesday pulled $1 billion in
funding for Israel’s Iron Dome missile defense system from their
bill after progressives objected to the provision. A spokesperson
for House Appropriations Committee Chairwoman Rosa DeLauro (D-CT)
said that the Iron Dome funding will be included in the final
defense funding bill later this year, according to
The Hill.
The bottom line: Tuesday’s House vote
won’t do anything to prevent a government shutdown or debt default
given Senate Republicans’ opposition to the legislation. And with
Democratic differences far from resolved, the fate of President
Biden’s Build Back Better plan remains up in the air as
well.
US Debt
Default Could Cost US Households $15 Trillion: Analysis
With Republicans vowing to reject any bipartisan effort to
raise or suspend the debt ceiling, and Democrats sticking to their
plan to address the limit through a bill that requires support from
both parties, the threat of default on U.S. payment obligations now
looms over the economy — a scenario that could cause an immediate
and deeply painful recession, according to a new report from
Moody’s Analytics.
In their analysis, Moody’s chief economist Mark Zandi and
co-author Bernard Yaros found that an extended stalemate over the
debt ceiling would cause a recession that reduces employment by as
much as 6 million, pushing the unemployment rate up to 9%. And the
stock market would crash, wiping out as much as $15 trillion in
household wealth.
“This economic scenario is cataclysmic,” Zandi and Yaros
said. “The downturn would be comparable to that suffered during the
financial crisis.”
Though less dramatic, a short-term default would be
damaging as well. “Even if resolved quickly, Americans would pay
for this default for generations, as global investors would rightly
believe that the federal government’s finances have been
politicized,” Zandi wrote in a note to clients Tuesday.
Yellen issues another plea: In an
opinion piece in The Wall Street Journal last weekend, U.S.
Treasury Secretary Janet Yellen issued another warning on the debt
ceiling, which currently stands at $28.4 trillion. Yellen said a
default would spark a recession that would do permanent damage. "We
would emerge from this crisis a permanently weaker nation," Yellen
wrote.
“We can borrow more cheaply than almost any other country,
and defaulting would jeopardize this enviable fiscal position,”
Yellen said. “It would also make America a more expensive place to
live, as the higher cost of borrowing would fall on consumers.
Mortgage payments, car loans, credit card bills—everything that is
purchased with credit would be costlier after default.”
One month to go: Moody’s estimates
that the Treasury will be forced to default on payment obligations
starting on October 20, and most experts have put the date
somewhere in late October or early November. That gives lawmakers
just a few weeks to figure out how to handle the debt limit before
a potentially catastrophic default occurs. Both parties have said
they are confident there will be no default, but for now there is
no clear path forward to avoid such an outcome.
Moody’s warns that even if Congress resolves the problem
before the default date, there may be a price to pay for the
politicization of the debt limit. According to Zandi and Yaros, the
battles over the debt ceiling in 2011 and 2013, when Republicans
threatened to withhold support for raising the limit without
concessions from Democrats, cost the U.S. economy dearly, reducing
investment by as much as $180 billion and employment by 1.2 million
jobs by 2015.
“Brinkmanship around this whole process will be reflected
in higher cost to taxpayers,” Zandi
told The Washington Post’s Jeff Stein. “There is a
cost to doing this in a way that is not at least somewhat
bipartisan.”
Quote of the Day
“I've been here for cliffs, and crises and wars. And this is
going to be the biggest mash up we've ever had since I've been here
with the debt limit, with the government shutdown, with
reconciliation, and with infrastructure, and I have no idea how it
all works out. No idea. That’s it.”
– Rep. Peter DeFazio (D-OR), chair of the House
Transportation and Infrastructure Committee and a member of
Congress since 1987, as quoted by Punchbowl
News.
Tweet of the Day
From PBS NewsHour correspondent Lisa
Desjardins:
“Basically what we have on the Hill *at the moment* is
a bathtub full of cats, with various Democratic players throwing in
more and more tangled balls to the already well tangled CR, debt
and infrastructure situations.”
Biden Pledges to Double Aid for Developing Countries to Deal
With Climate Change
President Biden announced that he would work with Congress to
double the funding the United States provides each year to help
developing countries cope with climate change and reduce their
emissions. Biden said in April that the U.S. would double its
spending to $5.7 billion, and his pledge Tuesday to double that
figure again would lift the U.S. contribution to $11.4 billion.
“This will make the United States a leader in public climate
finance,” Biden said in a speech at the United Nations.
While some climate activists welcomed the announcement, they
also warned that it was still not enough.
“Developed countries pledged more than a decade ago to begin
providing $100 billion annually by 2020 to help the most
defenseless nations deal with the deepening consequences of
sea-level rise, heat waves, intensifying hurricanes and other
effects of warming — and to hasten the transition away from fossil
fuels as those economies grow,” The Washington Post’s Brady Dennis
reports. “But that money has never fully
materialized” — and data from the Organization for Economic
Cooperation and Development show that, as of 2019, developed
nations remained about $20 billion short of their promised
total.
“Whether the latest climate finance figure represents a fair
share for the United States, given its wealth and its role as the
world’s largest historical emitter of greenhouse gases, is open to
interpretation,” Dennis adds. “Earlier this year, an analysis by
the independent international think tank Overseas Development
Institute found the United States ideally should be contributing
$31.9 billion to $49.4 billion a year toward climate help for
developing nations. This week, a collection of advocacy groups,
including the Natural Resources Defense Council and the Sierra
Club, called on the administration to commit at least $12 billion
per year by 2024.”