Getting 'Dangerously Close' on the Debt Limit

Getting 'Dangerously Close' on the Debt Limit

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Plus, Democrats inch toward a big deal
Tuesday, October 5, 2021
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Senate Heads for Another Doomed Vote on Debt Ceiling

Lawmakers’ game of chicken with the debt limit was always risky. Now it’s getting downright dangerous.

Democrats have set up another vote Wednesday on a bill that would suspend the federal debt ceiling until December 2022, but Republicans said they intend to block the measure, as they have done previously.

Senate Majority Leader Chuck Schumer (D-NY) on Tuesday pleaded with Republicans to change their plans. "Tomorrow's vote is simply a cloture vote. It is not a vote to raise the debt ceiling," he said. "It's rather a procedural step to let Democrats raise the debt ceiling on our own, just as Republicans have called for."

But Democrats would need 10 Republicans to join them on the procedural vote, and there’s no indication that Republicans will do so.

Sen. Roy Blunt (R-MO) said 40 or 45 Republicans are in favor of allowing the bill to come to a vote, as long as they don’t have to actually support the bill, but five or so Republicans are refusing to compromise. "It has to be everyone," Blunt said.

Sen. Angus King of Maine, an independent who caucuses with Democrats, slammed Republicans for failing to even debate the matter. "There’s no bargaining," he said. "They’re just stamping their feet and saying no."

Reconciliation alternative: Democrats can raise the debt ceiling on their own through the reconciliation process, as McConnell is pushing them to do. But they are resisting doing so and they’re running out of time to start the complicated process.

Sen. Joe Manchin (D-WV) vowed Monday that Democrats will not allow the U.S. to default. Although he wasn’t entirely clear about the process he prefers for doing so, he invoked some of the procedures that would be involved in reconciliation. "We can prevent default, we really can prevent it," he said. "And there's a way to do that, and there's a couple other tools we have that we can use. Takes a little bit of time, a little bit of — it's gonna be a little bit of pain, long vote-a-ramas, this and that — do what you have to do. But we cannot — and I want people to know — we will not let this country default."

But after a meeting of Democratic lawmakers Tuesday, at least one senator said reconciliation is not an option. "We're not doing it on reconciliation," Sen. Tim Kaine (D-VA) told reporters.

Schumer also downplayed the use of reconciliation. "We do not have the luxury of using a drawn-out, convoluted and risky process," he said. "We could prevent a catastrophic default with a simple majority vote tomorrow if Republicans would just get out of the damn way.

Republican strategy: One reason McConnell is insisting that Democrats use the reconciliation process to raise the debt limit is that it would eat up limited legislative time on the floor of the Senate, further delaying work on President Joe Biden’s agenda.

"There's no reason for us to help facilitate bad policy that we disagree with, and so they have to eat up little floor time passing the debt ceiling through reconciliation that's fine with me," Sen. John Cornyn (R-TX) said Monday.

According to Punchbowl News, McConnell’s strategy is to use the debt ceiling crisis to paint Democrats as fiscally irresponsible. "Even after Republicans spent like drunken sailors during the Trump years, they’re eager to have the political conversation turn back toward the national debt and deficits -- never mind the hypocrisy," Punchbowl said Tuesday. "Republicans look at the $3.5 trillion reconciliation package proposed by President Joe Biden on top of the $1.9 trillion American Rescue Plan, coupled with rising inflation, and believe they can paint Democrats as reckless and incapable of leading the country during these uncertain times."

Biden blitz: Accusing Republicans of being "hypocritical, dangerous and disgraceful," President Joe Biden on Monday kicked off public relations effort to blame the GOP for the standoff over the debt ceiling. The White House will rely on surrogates to spread their message, Politico’s Christopher Cadelago reports, which will include the charge that Republicans are now refusing to take responsibility for the trillions of dollars in debt that were created under former President Donald Trump.

More warnings: Treasury Secretary Janet Yellen told CNBC Tuesday that the U.S. economy would likely tumble into a recession if Congress fails to raise or suspend the debt ceiling.

"I do regard October 18 as a deadline," she said, referring to the date the Treasury has estimated that it will run out of funds. "It would be catastrophic to not pay the government’s bills, for us to be in a position where we lacked the resources to pay the government’s bills."

Speaking at a House Financial Services Committee hearing, Securities and Exchange Commission Chair Gary Gensler told lawmakers that a default could unleash significant volatility in U.S. capital markets, which rely on Treasury securities to operate.

"I think we'd be in very uncharted waters," Gensler said. "Though we don't know for sure, we'd have significant volatility in the markets, and we'd see some breakages in the system."

Schumer echoed the dire tone on the floor of the Senate Tuesday. "It's not too late, but it's getting dangerously close," Schumer said as he urged his fellow lawmakers to act quickly on the matter.

Dems Inch Toward Compromise on Biden Agenda

President Biden and congressional Democrats are inching closer to agreement on how much to scale back their $3.5 trillion package to expand the social safety net and combat climate change, though they still face major disagreements on the details of the legislation.

Biden pitches his plans: Biden on Tuesday traveled to Howell, Michigan — located in a key election swing district — to sell his economic agenda beyond the D.C. Beltway. "Biden’s travel strategy is guided in part by a desire to show his plans are popular even in areas represented by at-risk Democrats," The Washington Post reported, citing a White House official.

In a speech at the International Union of Operating Engineers Local 324 training facility, Biden said that the nation is at an inflection point that requires large-scale investment and argued that the two major pieces of legislation lawmakers are now debating, the safety net package and a $1 trillion infrastructure bill, would "breathe new life" into the U.S. economy and maintain its competitiveness with China.

"We risk losing our edge as a nation. Our infrastructure used to be the best in the world, literally not figuratively," Biden said. "Today, according to the world economic forum, we rank 13th." He added that it isn’t enough to just invest in physical infrastructure — the country must invest in education and other aspects of what his administration has termed "human infrastructure." And he emphasized his plans to pay for his agenda by taxing the rich and corporations.

Democrats narrow the gap on costs: Yet even as Biden was again laying out a broad vision for remaking the economy for the rest of the 21st century, the president and congressional Democrats have been discussing how to pare back the size of their sweeping $3.5 trillion Build Back Better package.

Biden held a virtual meeting Monday with a dozen progressives and reportedly repeated a new lower target range for the bill of $1.9 trillion to $2.2 trillion. Rep. Pramila Jayapal (D-WA), chair of the Congressional Progressive Caucus, reportedly countered with a range of $2.5 trillion to $2.9 trillion. And Sen. Joe Manchin (D-WV), the centrist who last week indicated his limit would be $1.5 trillion, signaled Tuesday that he’d be open to something in the range of $1.9 trillion to $2.2 trillion.

"I’m not ruling anything out," Manchin told reporters, "but the bottom line is I want to make sure that we’re strategic and we do the right job and we don’t basically add more to the concerns we have right now."

While some lawmakers are still pressing for a larger package, the numbers being discussed suggest that Democrats have managed to quickly narrow what last week appeared to be a roughly $2 trillion gap.

Still, there are plenty of disagreements on the substance of the legislation that still need to be worked out. Those reportedly include Manchin’s demands that the bill include the Hyde Amendment restricting the use of federal funds for abortions and that natural gas be eligible for a clean energy grant program.

Tough choices on cuts: Democrats will also have to decide whether to jettison some portions of their plan to focus on top priorities or keep as many pieces as possible while cutting their duration or the number of people who will benefit from them. "The theme among members is to do fewer things better," House Speaker Nancy Pelosi reportedly said on a call with top Democratic lawmakers. Biden, meanwhile, reportedly told progressives Monday that he is open to means-testing some programs, a cost-cutting measure that Manchin has advocated.

Progressives, though, have suggested using some shorter timeframes to reduce costs, on paper at least. "Some Democrats are betting that if popular programs like free community college or universal prekindergarten care are passed and then expire, it will be relatively easy to extend them, since any effort to take away such everyday benefits would be unpopular," the Post reported.

Some centrists object to that approach. "The idea that we would enact a whole bunch of programs and sunset them after two years, three years, four years, to me that’s just budget gimmickry," Rep. Ed Case (D-HI) told The Hill on Monday.

A silver lining for Democrats? While they debate just how to scale back their plans, a smaller package may reduce some friction once Democrats turn to the revenue side of the ledger — or at least that’s what Biden officials hope. "Administration officials also say the reduced cost of spending and tax cuts in the bill means Democrats will have an easier time settling on the revenue increases — including tax hikes on high earners and corporations — to cover the price tag," The New York Times said.

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