Congressional Democrats propose to suspend the federal debt ceiling until the end of next year as part of a must-see bill needed to avoid a government shutdown, setting up a high-stakes showdown with Republicans on the country’s statutory borrowing limit.
Tying the two issues together, Democrats are betting Republicans will blink under pressure from the business community, which would suffer if the United States were to trigger an unprecedented default on its debt obligations.
“We believe that a suspension of the debt limit until December 2022 would provide a time frame proportional to the debt incurred as a result of the passage of the bipartite $ 908 billion emergency relief legislation. COVID from last winter, “said House Speaker Nancy Pelosi (D-Calif.) And Senate Majority Leader Chuck Schumer (DN.Y.), said Monday in a letter to lawmakers. .
It is a risky bet and one that could easily backfire.
Republicans in the House and Senate have made it clear that they will not vote for any bills to raise the debt ceiling. They argue Democrats should do it themselves as part of a “budget reconciliation” bill that Democrats plan to pass without GOP support in the coming weeks.
“Since the Democrats decided to go it alone [on reconciliation] they will not get help from Republicans in the Senate to raise the debt ceiling. I explained this clearly and consistently for two months, ”reiterated Senate Minority Leader Mitch McConnell (R-Ky.) In a speech on Monday.
Republicans maintain the debt limit should be raised – but not with Republican votes, even though they too voted for higher deficits and higher debt, especially under the Trump administration.
Raising the debt ceiling is a bit like paying off a credit card – when it raises the limit, Congress isn’t spending more money or increasing the budget deficit, it’s just allowing the Treasury Department to continue paying the debts that lawmakers have already authorized. Congress suspended the limit three times under the Trump administration.
If Congress does not raise the debt ceiling, the federal government could fail to pay bondholders or beneficiaries of programs such as Social Security retirement insurance, which could wreak havoc on the economy. economy. The ensuing economic crisis, however, could be exacerbated by a simultaneous government shutdown if Congress does not act by September 30.
McConnell said in his speech on Monday that Republicans would be prepared to vote for a bill needed to avoid a government shutdown if Democrats drop the provision suspending the debt ceiling. But Democrats are showing no signs of backing down.
“On the debt limit, Republicans are having a dinner and a race of historic proportions,” Schumer said in a speech, criticizing Republicans for threatening to vote against lifting the debt ceiling after supporting previous projects spending bill that added to the debt.
Democrats could technically lift the debt ceiling themselves, but that would be difficult due to procedural and political hurdles. Some budget experts say the budget reconciliation process would require Democrats to specify exactly how much money the government could borrow, which could give Republicans attack publicity material ahead of next year’s midterm election.
But if Democrats deal with the debt limit through the “regular” legislative process, they could simply “hang” the limit without entering a dollar amount. Republicans have done exactly that three times under the Trump administration, adding trillions to federal debt. The only difference now is that a Democrat occupies the White House.
Republicans argue that because Democrats are seeking $ 3.5 trillion in new spending on a partisan basis, they should raise the debt limit themselves. The argument ignores the fact that annual budget deficits result from spending and fiscal policies supported by both sides over the years. He is also ignoring the Democrats’ plans to offset their new spending with tax revenue.
In their Monday letter, Pelosi and Schumer highlighted Republicans’ support for last December’s $ 908 billion pandemic relief bill, which extended unemployment benefits and sent checks for $ 600 to most households. They specifically called Sens. Bill Cassidy (R-La.), Mitt Romney (R-Utah), Rob Portman (R-Ohio) and Susan Collins (R-Maine) for negotiating the deal on the December bill.
“The American people expect our fellow Republicans to take responsibility and pay off the debts they proudly helped incur in the December 2020 COVID ‘908’ package that helped American families and small businesses to recovering from the COVID crisis, “Democratic leaders. noted.
So far, however, centrist-minded Republican senators like Romney and Collins have sided with McConnell amid the fight against the debt ceiling, echoing his arguments that Democrats should raise them. – even the borrowing limit.
The debt ceiling officially expired at the end of July, but the so-called extraordinary measures taken by the Treasury Department will allow the government to issue new debt until next month, leaving lawmakers little time to raise them and maintain the government. open.
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