Republicans say Democrats shouldn’t call their bluff on bringing the U.S. economy to the brink of an economic catastrophe.
With time running out for Congress to raise the debt ceiling, Republican senators are betting that Democrats will blink first and move to lift the borrowing cap on their own via a complicated process known as reconciliation, which would allow the Democratic caucus to pass it with just the support of its 50 senators. They believe that since Democrats control the government, the public will hold Democrats responsible for not doing everything they can to raise the debt limit.
“We’re not bluffing,” Sen. John Cornyn (R-Texas) told HuffPost.
The Senate is essentially locked in a high-stakes game of chicken, and both sides seem convinced the other will back down. Republicans this week are expected to filibuster legislation raising the debt ceiling for a third time. They refuse to allow a straight up-or-down vote, inflicting maximum pain on Democrats over the debt ceiling.
“Democrats are willing to do all the work raising it,” President Joe Biden said on Monday, calling on GOP senators to drop their filibuster. “Republicans just have to let us do our job. Get out of the way.”
Senate Minority Leader Mitch McConnell (R-Ky.) said Republicans won’t allow a simple majority vote.
“That would require getting consent from every single Republican to lower the threshold of 51,” McConnell said Tuesday. “That won’t happen.”
The debt ceiling is a legal limit on how much the federal government can borrow in order to fund operations when Congress has authorized more spending than can be covered by incoming tax revenue, as has been the case for the past 19 years. The current limit is $28.4 trillion.
Congress has adjusted the debt limit nearly 100 times in the past century, including three times during the Donald Trump administration, when Democrats agreed to suspend the limit without making any demands. Republicans are refusing to cooperate now that a Democrat is back in the White House.
Treasury Secretary Janet Yellen has said her agency will run out of cash sometime around Oct. 18, meaning Treasury could begin to default on payments to bondholders or even beneficiaries of programs like Social Security. That gives lawmakers less than two weeks to avert a debt default.
Yelled warned Tuesday that a default would cause a recession. “It would be catastrophic to not pay the government’s bills,” Yellen said on CNBC.
Republicans argue Democrats should handle the debt ceiling via reconciliation, a complicated budget process that could take weeks to complete. Any Republican senator could delay the passage of a bill raising the debt limit via reconciliation, increasing the likelihood of default. Even waiting until the last minute to raise the debt limit could lead to a recession.
“We do not have the luxury of using a drawn-out, convoluted and risky process,” Senate Majority Leader Chuck Schumer (D-N.Y.) said Tuesday.
Some GOP senators said they would be willing to vote for a debt ceiling increase if Democrats abandon their plans to pass their safety net and climate package, the Build Back Better Act. The GOP has been hammering away at the legislation, which is to be financed in part via taxes on the wealthy, as a “radical” attempt to turn American society to socialism. The bill includes funding for free community college and prekindergarten, monthly payments to most households with children, expanded health care coverage, and new subsidies for green energy.
“I’d take that deal ... in a New York minute. That’s what this is all about,” Senate Minority Whip John Thune (R-S.D.) told HuffPost.
But other Republicans said they would oppose a debt ceiling increase no matter what ― even in the unlikely scenario that Democrats dropped their efforts to pass the Build Back Better Act into law after taking back the Senate and White House in 2020.
“Probably not because they want open-ended spending. We want some kind of curb,” Sen. Richard Shelby (Ala.) said when asked about the hypothetical proposition.
Sen. Ron Johnson (Wis.) said he wouldn’t take that deal either because Democrats “can drop it and then bring it back up” after the debt ceiling is increased.
“Once you raise the debt limit then they’d be free to unilaterally spend a whole lot more money,” Cornyn added.
Democrats could use the reconciliation process to raise the debt limit so high it never becomes an issue again, or set it so that it automatically corresponds to the amount of excess spending Congress has authorized. But Democrats aren’t seriously considering such ideas, likely because not all 50 senators in the Democratic caucus would go for it.
For the most part, Republicans have said a federal default would be catastrophic and should be avoided, even though they themselves won’t lift a finger to help Democrats avoid it.
The mere threat of default in 2013, when Republicans sought spending cuts in exchange for raising the limit, caused investors to avoid Treasury securities, which serve as a benchmark throughout credit markets. A federal default would likely cascade through the financial system and result in higher borrowing costs for everybody.
But some lawmakers believe Treasury’s Oct. 18 deadline isn’t a firm one and that bad consequences would take longer to develop.
“What would happen would be the Treasury actually saying, ‘OK, we’re gonna have to prioritize how we’re paying the bills.’” Sen. Mike Rounds (R-S.D.) told HuffPost. “None of us want to see that happen.”