Congressional Democrats are proposing to suspend the federal debt ceiling through the end of next year as part of a must-pass bill needed to avert a government shutdown, setting up a high-stakes showdown with Republicans over the nation’s statutory borrowing limit.
By tying the two issues together, Democrats are betting that Republicans will blink under pressure from the business community, which would suffer if the U.S. triggers an unprecedented default on its debt obligations.
“We believe a suspension of the debt limit through December 2022 would provide an amount of time commensurate with the debt incurred as a result of passing last winter’s bipartisan $908 billion emergency COVID relief legislation,” House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Chuck Schumer (D-N.Y.) said in a letter to lawmakers on Monday.
It’s a risky gambit ― and one that could easily backfire.
Republicans in the House and Senate have been explicit that they won’t vote for any bill to raise the debt limit. They argue Democrats should do it themselves as part of a “budget reconciliation” bill that Democrats are planning to pass without GOP support sometime in the coming weeks.
“Since Democrats decided to go it alone [on reconciliation] they will not get Senate Republicans’ help with raising the debt limit. I’ve explained this clearly and consistently for two months,” Senate Minority Leader Mitch McConnell (R-Ky.) reiterated in a floor speech on Monday.
Republicans maintain the debt limit should be raised ― just not with any Republican votes, even though they, too, have voted for higher deficits and debt, particularly under the Trump administration.
Raising the debt ceiling is sort of like paying a credit card ― when it raises the limit, Congress does not spend more money or add to the budget deficit, it just lets the Treasury Department continue to pay for debts that lawmakers have already authorized. Congress suspended the limit three times during the Trump administration.
If Congress fails to raise the debt limit, the federal government could fail to pay bondholders or beneficiaries of programs like Social Security retirement insurance, potentially wreaking havoc on the economy. The ensuing economic crisis could be compounded further, however, by a simultaneous government shutdown if Congress doesn’t act by Sept. 30.
McConnell said in his speech on Monday that Republicans would be willing to vote for a bill needed to avert a government shutdown if Democrats drop the provision suspending the debt ceiling. But Democrats aren’t showing signs of backing down.
“On debt limit, the Republicans are doing a dine and dash of historic proportions,” Schumer said in a speech, slamming Republicans for threatening to vote against lifting the debt ceiling after supporting previous spending bills that added to the debt.
Democrats could technically lift the debt ceiling on their own, but doing so would be difficult because of procedural and political hurdles. Some budget experts say the budget reconciliation process would require Democrats to specify exactly how much more money the government could borrow, potentially giving Republicans attack ad material ahead of next year’s midterm elections.
But if Democrats deal with the debt limit through the “regular” legislative process, they could simply “suspend” the limit without getting into a dollar amount. Republicans did exactly that three times under the Trump administration, adding trillions to the federal debt. The only difference now is that a Democrat occupies the White House.
Republicans argue that because Democrats are pursuing $3.5 trillion in new spending on a partisan basis, they ought to increase the debt limit by themselves. The argument ignores the fact that annual budget deficits result from spending and tax policies supported by both parties over the years. It also ignores Democrats’ plans to offset their new spending with tax revenue.
In their letter on Monday, Pelosi and Schumer emphasized Republican support for last December’s $908 billion pandemic relief bill, which extended unemployment benefits and sent $600 checks to most households. They specifically called out Sens. Bill Cassidy (R-La.), Mitt Romney (R-Utah), Rob Portman (R-Ohio) and Susan Collins (R-Maine) for hashing out the agreement on the December bill.
“The American people expect our Republican colleagues to live up to their responsibilities and make good on the debts they proudly helped incur in the December 2020 ‘908’ COVID package that helped American families and small businesses reeling from the COVID crisis,” the Democratic leaders said.
So far, however, centrist-minded Republican senators like Romney and Collins have sided with McConnell amid the debt ceiling fight, echoing his arguments that Democrats should raise the borrowing limit on their own.
The debt ceiling officially expired at the end of July, but so-called extraordinary measures undertaken by the Treasury Department will allow the government to issue new debt until sometime next month, giving lawmakers little time to raise it and keep the government open.