Efforts to raise the debt ceiling failed twice this week in the Senate as Democratic leaders scramble to find a successful strategy and the US stock market plunges in fear the federal government will default on approaching bills.
This week was predicted to be a wild one with pending action on the physical infrastructure bill, budget reconciliation, the debt ceiling and a stopgap spending extension. The federal fiscal year ends September 30 and Treasury Secretary Janet Yellen warned the government could be unable to pay bills as soon as October 18.
Senate Republicans have blocked measures to suspend the debt limit, which Democrats included with a stopgap spending extension. Senate Majority Leader Chuck Schumer now plans to separate the two measures to win bipartisan approval of the spending extension.
Senate Minority Leader Mitch McConnell has tied GOP opposition to suspending the debt ceiling to the Democratic $3.5 trillion reconciliation package, which contains many of President Biden’s human infrastructure proposals. Democrats argue the debt ceiling suspension is necessary because of a Republican tax cut under President Trump, not because of any future deficit spending.
Adding to the standoff, Republicans were upset the House-passed continuing resolution to extend current spending until December 3 failed to include $1 billion for Israel’s Iron Dome rocket defense system because of opposition from House progressives. House Speaker Nancy Pelosi quickly brought separate legislation to the floor to approve the $1 billion, which passed by a 420-9 vote.
McConnell suggested Democrats tuck a debt ceiling increase in the budget reconciliation package, which is exempt from the Senate filibuster rule and can pass with only Democratic votes. Schumer rejected that suggestion. He said if Republicans refuse to vote to raise the debt ceiling, they should “get out of the way” by not invoking the filibuster’s 60-vote cloture rule. Schumer said raising the debt ceiling relates to past spending, not the spending anticipated in the reconciliation package.
Pelosi has tentatively scheduled a House vote today on a stopgap spending measure without a debt ceiling suspension provision. She noted edge-of-the-cliff consideration of the debt ceiling is affecting financial markets. Stock market indices fell sharply this week out of concern over the debt ceiling stand-off and inflationary pressures.
A similar debt ceiling stand-off in 2011 led to a downgrade of the US credit rating. Congress has variously raised the debt ceiling or suspended it. After a two-year suspension, Congress reinstated the debt ceiling in 2019 at $28.4 trillion. Democrats have explored ditching the debt limit altogether because, according to House Budget Chair John Yarmuth, D-Kentucky, it hasn’t curbed deficit spending, only unnerved financial markets.
Another option is to give the Treasury secretary the power to adjust the debt ceiling administratively, with Congress in a position to reject an increase. A similar process was used in 2011 and 2013.
A more exotic option proposed by House Judiciary Chair Jerry Nadler, D-New York, is to invoke a provision from the 1997 omnibus appropriations measure to authorize minting a $1 trillion platinum coin.
The 14th Amendment to the Constitution says the validity of US public debt “shall not be questioned,” which might be interpreted as allowing the President to waive the debt ceiling unilaterally.
The stalemate over major spending provisions may force congressional votes next week, according to House Majority Leader Steny Hoyer, D-Maryland. If the stopgap spending extension isn’t approved, a partial federal government shutdown could begin as early as Friday.
Debt ceiling options include abolishing it, letting the Treasury secretary do it unilaterally, allowing the President to waive it and minting a $1 trillion platinum coin.
The spending extension Democrats have brought forward includes $28.6 billion in natural disaster relief, $6.3 billion for Afghan evacuees being resettled in the United States and $2.5 billion for unaccompanied children who entered the country illegally.
Congressional Democrats and Biden also face a continuing intra-party struggle over the size and scope of the budget reconciliation package. Senators Joe Manchin, D-West Virginia, and Kyrsten Sinema, D-Arizona, want the $3.5 trillion price tag reduced, while House progressives threaten to torpedo the $1 trillion physical infrastructure bill that was negotiated downward to satisfy Manchin and Sinema.
Pelosi had promised House Democratic moderates a vote on the infrastructure bill by September 27, but she has postponed the vote because of the stalemate. In frustration, Senator Bernie Sanders, who orchestrated the $3.5 trillion package, urged the vote to proceed and fail without enough Democratic votes. Meanwhile, Biden met with Manchin and Sinema Tuesday, though without finding a compromise for what could be an embarrassing lost at the hands of his own party.