The U.S. government will fail to pay its bills come Oct. 18, potentially causing an economic crisis, unless Congress raises a legal limit on how much the Treasury Department can borrow.
But Republicans are refusing to cooperate and could force Democrats to deal with it on their own.
Almost everyone agrees defaulting on the debt would be a disaster. So if Democrats have to deal with the debt limit themselves, why don’t they just abolish the limit while they’re at it?
The short answer is that not all Democrats want to get rid of the debt limit, so they don’t have the votes to do so.
But discussions about ways of making debt ceiling standoffs obsolete in the future are growing in Congress. House Speaker Nancy Pelosi (D-Calif.) said Tuesday that Democrats are looking for new ways of avoiding the problem. One possible solution would be for Congress to pass a law giving the Treasury Secretary the power to raise the borrowing limit, with Congress retaining the option to vote it down.
Another, more controversial, idea would be for the government to mint a trillion-dollar coin and deposit it with the Federal Reserve in exchange for cash to pay bills. Yet another proposal would be for Congress to automatically increase the debt ceiling whenever it authorizes additional spending.
Pelosi said Democrats might consider those options later, but not now. “Right now, we have to raise the debt ceiling,” she said.
The debt ceiling is one of several agenda items Democrats are juggling. Congress also needs to pass a funding bill to prevent a partial government shutdown on Thursday at midnight. The House at some point will hold a vote on a bipartisan infrastructure bill that the Senate passed in July. And Democrats are struggling to coalesce around a major tax-and-spending bill that would provide new benefits to millions of Americans.
Republicans have argued that since Democrats are doing the partisan spending bill, they might as well add the debt limit to it, but so far Democrats are insisting that the debt ceiling be dealt with in a bipartisan manner. After all, Congress racked up the debt in a bipartisan manner.
Senate Budget Committee chair Bernie Sanders (I-Vt.) suggested Republicans would come around, since they’d have to be crazy not to.
“I don’t think that they are that crazy that they would plunge the American economy and the entire world economy into a recession or depression, because we’re not paying the debts owed that were incurred under the Trump administration,” Sanders said. “Both parties have got to come together and raise the debt limit, it’s not just the Democratic issue.”
Senator Majority Leader Chuck Schumer (D-N.Y.) said Tuesday that the reconciliation process would take too long, given the looming October deadline.
Raising the debt ceiling lets the Treasury Department borrow money to pay bills that Congress has already incurred with past legislation. Lawmakers have changed or suspended the limit nearly 100 times since establishing an aggregate limit on federal borrowing in 1939, including three times during the Trump administration.
Former President Donald Trump and Schumer even had a “gentleman’s agreement” on repealing the debt ceiling, but the deal never came to fruition.
The latest standoff frustrates some Senate Democrats who were in Congress during previous budget battles where Republicans refused to fund the government or raise the debt ceiling. The mere threat of default in 2013 spooked investors and raised the government’s borrowing costs; an actual default could halt Social Security payments and wreck the economy.
“The debt limit serves no purpose in 2021 other than to give the Republicans a chance to make political trouble. The time to be serious about finances is when Congress votes on revenues and spending. Period,” Sen. Elizabeth Warren (D-Mass.) told HuffPost.
Sen. Chris Coons (D-Del.) said that Republican objections to even allow a simple majority vote on raising the debt limit, something the Democrats can do by themselves, raises questions about “whether or not we should take steps to avoid dangerous gamesmanship like this.”
“It’s a joke of a debate but, as always, there are a few members that are scared of the 15-second digital ads that conservatives will run against them.”
The problem is that doing away with the debt limit, or making it essentially irrelevant by raising it to an absurdly large sum, would require the support of every Democrat in the Senate, something the party is struggling with right now. Sen. Jon Tester (D-Mont.), for instance, said Tuesday he didn’t know about ditching the debt ceiling.
“What I’d be for is Republicans doing what they were elected to do and that’s to help keep this country the biggest, the greatest economic power on earth,” Tester said.
Democrats don’t all support getting rid of the debt limit, Sen. Mark Warner (D-Va.) said, but more senators are coming around to the idea.
“The appetite this week is much higher than it’s been in the past,” he said. But, he added, “The current kerfuffle might not be the best time to do it.”
Jim Manley, a former spokesman and adviser to Harry Reid, a Nevada Democrat who served as Senate Majority Leader from 2007 to 2015, said budget rules would prevent Democrats from using the budget reconciliation process to abolish the debt ceiling outright.
But Democrats could use the process to set the debt limit at such a high number that it’s effectively irrelevant ― if they wanted to.
“This whole debt limit debacle is a classic example of something that has far outlived its usefulness and that needs to go away before it causes real damage,” Manley said. “It’s a joke of a debate but, as always, there are a few members that are scared of the 15-second digital ads that conservatives will run against them.”