Senate nears deal to stave off debt crisis until Dec.
WASHINGTON — Senate Democrats and Republicans neared agreement Wednesday to temporarily pull the nation from the brink of a debt default, working to punt their showdown on raising the federal borrowing limit to December after Republicans bowed to pressure to stave off immediate fiscal calamity.
With the threat of a default as little as 12 days off, Sen. Mitch McConnell of Kentucky, the minority leader, made a tactical retreat and announced that Republicans would allow Democrats to vote on a short-term extension. He did not, however, lift his blockade of a longer-term increase in the debt cap, demanding anew that Democrats eventually use a complicated and time-consuming budget procedure known as reconciliation to lift it into next year or beyond.
Democrats declared the offer at least a temporary victory, even as they said they would never capitulate to McConnell’s longer-term demand. Senators met into the evening to iron out the details, and Democrats said they would move forward with a vote as early as Wednesday, then quickly pivot to negotiating a multitrillion-dollar measure to address climate change, expand the social safety net and raise taxes on the wealthy and corporations.
“Around here, two months is a lifetime,” said Sen. Bernie Sanders, I-Vt., chairman of the Budget Committee, who hailed McConnell’s offer as “very good news.”
“There would have been a global economic collapse if in fact the wealthiest nation on earth did not pay its debts,” Sanders said. “We’re going to pay our debts. We have two months to figure it out.”
For all the self-congratulations, the agreement, if nailed down, resolved little beyond the immediate timetable. It would set up yet another consequential deadline for December, when Congress is already facing a hard date by which it must fund the government. Democrats also hope to complete their push to enact President Joe Biden’s ambitious domestic agenda before then.
“We are willing to take this offer in order to stave off fiscal ruin,” said Sen. Chris Murphy, D-Conn. “But we are all beside ourselves that the only thing Republicans are willing to do is prevent disaster for three months and put us right back in this position.”
They did so after weeks of intransigence on the debt ceiling and in the face of mounting pressure from the Biden administration, Wall Street and politically powerful interest groups. For a week, Biden has been emphasizing the stakes of failing to quickly raise the debt ceiling, and he has ratcheted up those efforts in recent days, in public remarks and during a meeting with finance executives at the White House on Wednesday.
Biden’s Council of Economic Advisers issued a report Wednesday morning laying out in detail the grim consequences of a default, and declaring, “If Congress fails to act, it could take decades for the United States to fully recover.”
Secretary of Defense Lloyd Austin also sounded the alarm with a statement warning that a debt ceiling breach would “seriously harm our service members and their families” by calling into question whether troops, Pentagon staff or defense contractors would be paid.
And in a letter to lawmakers circulated by the White House, AARP, a powerful lobbying group for seniors, cautioned that millions of older Americans could go without Social Security or Medicare benefits if the cap were not raised.
McConnell’s proposal offered a way to defuse criticism that his party was acting recklessly by blocking Democrats from even taking up a bill to raise the debt ceiling until December 2022. It also put off, for the time being, the prospect that Democrats might change the filibuster rules to allow themselves to go around Republicans and raise the debt ceiling unilaterally. It was that possibility, some GOP senators said Wednesday, that had motivated McConnell to seek a deal.
The offer also confronted Democrats with the prospect of a politically uncomfortable vote that some of them had wanted to avoid. McConnell demanded that they specify a dollar amount by which they would raise the debt cap, not simply suspend it until a certain date, potentially opening politically vulnerable Democrats to campaign ads attacking them for endorsing large amounts of spending.
“This will moot Democrats’ excuses about the time crunch they created and give the unified Democratic government more than enough time to pass stand-alone debt limit legislation through reconciliation,” McConnell said in a statement.
Even if the deal comes together, Democrats face three difficult choices for what to do in December when the new debt deadline cap would be reached. They could bow to McConnell’s demand and pass the long-term debt increase on their own through a time-consuming process that could bog them down and allow Republicans ample opportunities to tag them as big spenders.
Another option would be to move to change the Senate’s filibuster rules and allow a simple majority vote to raise the debt ceiling. Or, they could keep hoping that Republicans eventually fold under pressure, as they appeared to — at least temporarily — Wednesday.
McConnell’s offer was intended to counter Democrats’ argument that they did not have enough time to go through the multistep process of using budget rules to raise the debt limit. But his move may have been driven just as much by the threat of eliminating the filibuster.
Carving out an exception to the filibuster rules, which effectively require 60 votes to move forward with most legislation, has been done before to confirm judicial and executive branch nominees. But doing so unilaterally to raise the debt ceiling would be a step toward ending the practice for all policy matters and instituting straight majority rule.
The move has long been resisted by institutionalists and centrists in both parties — including two Democratic senators, Joe Manchin of West Virginia and Kyrsten Sinema of Arizona — although some leading Democrats argue the debt-ceiling crisis could change minds.
“Nothing changed,” Manchin told reporters Wednesday.
Sen. Roy Blunt of Missouri, the No. 4 Republican, warned that if Democrats changed the filibuster rule, “they’ll permanently change the Senate, permanently change the relationships that still matter in the Senate, and institute the idea that 50 of you plus a vice president of your party can always do whatever you want to do.
“I don’t think that’s healthy for the country,” he added. “It certainly wouldn’t be healthy for the Senate.”
Praying for Republicans to fold was an even riskier play for Democrats, given the stakes. If, for the first time, the U.S. government could not meet its obligations to international lenders, its role as the world economy’s safe-harbor investment would be called into question. Interest rates would most likely rise sharply, and global financial institutions would begin searching for new vehicles to store money, where it would not be subject to the whims of partisan politics.