Getting 'Dangerously Close' on the Debt Limit

DC: Senate Democrat’s policy luncheon press conference
CNP
By Yuval Rosenberg

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.

News

Views and Analysis