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.

At a Monday morning press conference, Biden stressed that he would rather simply table a bill passed by the House to settle the debt ceiling on the Senate floor and not let Republicans obstruct it. “Just step back and let us pass it,” Biden said, referring to Republicans.

The president called the reconciliation process “fraught with all kinds of potential risk 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 cut. This is because October 18 is not a deadline. Rather, it’s a better estimate of when the money will run out, making it much more difficult to know exactly when Congress should act to avert a potential financial catastrophe – and increasing the chances that lawmakers will accidentally trigger a default by not acting. rather early.

In his letter informing Congress of the October 18 date, Yellen underlined this uncertainty. “It is important to remember that estimates regarding the duration of our extraordinary measures and our remaining cash flow may move unpredictably forward or backward,” she wrote. “This uncertainty underscores the critical importance of not waiting to increase or suspend the debt limit.”

“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.

The day when the United States reaches a point where it risks defaulting is called “date X”. In another reflection of the uncertainty over exactly when this would happen, the Bipartisan Policy Center predicted that “date X” will likely occur between October 15 and November 4.

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, because 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 down 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 it 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

Schumer said on Monday that Congress “must” get a bill extending the debt ceiling at Biden’s office by the end of this week. He said he would soon table a fence on the bill passed by the House to suspend the debt limit until December 2022, which will trigger a vote to break a filibuster on it later this week.

“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 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 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.

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