Debt Ceiling Crisis: Why Congress Cannot Afford To Wait For October 18
And Democrats and Republicans are at a dead end on how to solve the problem. Republicans argue that Democrats, who control both houses of Congress and the White House, should deal with the issue on their own without GOP votes, while Democrats insist the issue is a shared bipartisan responsibility.
House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer have made it clear that they don’t want to do it themselves using a special budget process known as reconciliation. This leaves few options for a way forward in the midst of an approaching deadline.
The president called the reconciliation process “fraught with all kinds of potential dangers of miscalculation” and cautioned against it. But he didn’t rule it out entirely, arguing that he wasn’t going to cross that bridge until he got there.
The uncertainty over the exact timing of when Congress should act makes the whole situation even more complicated and risky.
Why the timing is uncertain
Capitol Hill lawmakers are used to facing important deadlines and waiting until the last minute to address them. Take what happened last week, for example, when Congress narrowly avoided a government shutdown. In this case, lawmakers faced a strict midnight September 30 deadline to act before government funding expired. Ultimately, both houses of Congress approved a draft bill to extend funding and prevent a shutdown hours before the deadline.
The debt deadline is not so clear. This is because October 18 is not a deadline. Rather, it is a better estimate of when the money will run out, making it much more difficult to know exactly when Congress should act to avoid a potential financial catastrophe – and increasing the chances that lawmakers will accidentally trigger a default by not acting. rather early.
“We know from previous deadlocks around debt limits that waiting until the last minute can seriously damage business and consumer confidence, increase borrowing costs for taxpayers, and have a negative impact on the credit rating of the United States for years to come, ”Yellen warned.
Both Democratic and Republican leaders in Congress have warned Congress cannot wait to act and may face an uncertain deadline.
In a letter to his fellow Democrats on Monday, Schumer warned: “We do not have the luxury of waiting until October 18, as it is our responsibility to reassure the world that the United States is fulfilling its obligations by timely and that the full faith and credit of the United States should never be called into question. “
Schumer went on to say, “The consequences of the very approach of Date X could be disastrous for our economy and devastating for American families, increasing borrowing costs for average Americans and hampering our long-term economic recovery. ”
The process for Democrats to go it alone
If Republicans don’t vote for Democrats and Democrats go it alone to raise the debt ceiling through reconciliation, it should take a long time, and it’s hard to predict exactly how long it would take.
Last week, Republican and Democratic staff spoke to the Senate parliamentarian again for advice on how the debt ceiling could be raised using this process. The parliamentarian made it clear that it could be done, but it would take a little time.
Here’s how it might work:
- Democrats should start reconciliation process to raise debt ceiling
- One vote-a-rama would start the process and another would end the process. These are two more opportunities for Republicans to run long, all-night voting marathons.
- Most assistants and members acknowledged that this process could take around two weeks and given where we are on the schedule, that means Democrats need to make a decision quickly if they are going to go this route. So far, executives say it’s not likely, although most people watching it closely see no other option.
Both sides recognize that it could happen, but Democrats’ reluctance to resort to reconciliation is real. This is in part because they believe it is the Republicans’ responsibility to help pay off the debts incurred together. It’s also because increasing the debt limit through reconciliation forces Democrats to vote for exactly how much they want to increase it. It’s an incredibly difficult vote for Democrats running for re-election.
If Democrats go ahead and raise the debt ceiling using this special budget process, the Senate parliamentarian made it clear last week that this would not impact the Democrats’ continued efforts. to use the process to also pass their social safety net bill, a top priority for President Joe Biden and the party. The new effort would be independent of it and could even be completed before the social safety net bill is passed.
What Democrats plan to do next
“Before the end of this week, the Senate must, must send a bill to the president’s office to deal with the acute debt ceiling crisis,” he said.
It is likely, however, that Republicans would block the bill from moving forward through the Senate as they continue to insist that Democrats use the reconciliation process to go it alone on the debt limit.
Over time, the pressure on Democrats to use reconciliation will only intensify.
High stakes and risk of economic catastrophe
If a default did occur, it would have to be financially catastrophic. Both sides want to avoid this even if they remain stuck in a deadlock on how to avoid it.
A mild recession would probably be the best case scenario if the US government defaults on its debts.
The worst-case scenario would involve downstream effects: potentially cascading job losses, a stop of several tens of billions of dollars in aid for the economic recovery of the Covid-19 which should still be delivered, a virtual freeze credit markets and gross domestic product taking a tangible blow. blow which could last several quarters.
Failure to raise the debt ceiling on time could also suspend the payments that millions of Americans rely on, including federal worker paychecks, medicare benefits, military salaries, military reimbursements. ‘taxes, social security checks and payments to federal contractors.
This story has been updated with additional developments.
CNN’s Ali Zaslav and Matt Egan contributed.