Republicans say Democrats shouldn’t call their bluff on bringing the U.S. economy to the brink of an economic catastrophe.
Republican senators bet that Congress will not act quickly enough to increase the debt limit. They are hoping Democrats will instead blink and pass the loan cap through reconciliation. The complicated process would permit the Democratic caucus only to get the support from its 50 senators. The Democrats believe that the public will hold Democrats to account for not raising the debt limit because they control the government.
“We’re not bluffing,” Sen. John Cornyn (R-Texas) told HuffPost.
Both sides appear to be convinced that the other side will give in. The Senate seems locked in an intense game of chicken. This week, Republicans are likely to filibuster legislation increasing the debt ceiling. Democrats will feel the most pain if they refuse to permit a direct up-or down vote on the debt limit.
“Democrats are willing to do all the work raising it,” President Joe Biden said on Monday, calling on GOP senators to drop their filibuster. “Republicans just have to let us do our job. Get out of the way.”
Senate Minority Leader Mitch McConnell (R-Ky.) said Republicans won’t allow a simple majority vote.
“That would require getting consent from every single Republican to lower the threshold of 51,” McConnell said Tuesday. “That won’t happen.”
If Congress authorizes spending that exceeds the amount of incoming tax revenues, the debt ceiling limits the government’s ability to borrow money. This has been true for 19 years. Current limit: $28.4 trillion
The debt limit has been adjusted nearly 100 times by Congress in the past century. It was also modified three times during Donald Trump’s administration. Democrats have agreed to suspend it without any demand. Republicans refuse to cooperate with Democrats now that a Democrat has returned to the White House.
Janet Yellen (Treasury Secretary) has indicated that Treasury will run out cash by Oct. 18. Treasury can then default on any payments it makes to bondholders and beneficiaries of programs, such as Social Security. The lawmakers have less time to prevent a debt default by this point.
Tuesday was a warning from Yelled that defaults would lead to a recession. “It would be catastrophic to not pay the government’s bills,” Yellen said on CNBC.
Republicans believe Democrats should manage the debt limit via reconciliation. This is a complex budget process which could take several weeks. The possibility of default could be increased by any Republican senator if a bill to increase the debt limit via reconciliation is not passed. Recession could result from waiting to raise debt limits until last-minute.
“We do not have the luxury of using a drawn-out, convoluted and risky process,” Senate Majority Leader Chuck Schumer (D-N.Y.) said Tuesday.
Some GOP senators stated that they will vote in favor of a higher debt ceiling, if Democrats drop their plan to repeal their safe-net and climate package (the Build Back better Act). The GOP has been hammering away at the legislation, which is to be financed in part via taxes on the wealthy, as a “radical” attempt to turn American society to socialism. It includes prekindergarten and community college funding, as well as monthly payments for most families with children.
“I’d take that deal … in a New York minute. That’s what this is all about,” Senate Minority Whip John Thune (R-S.D.) HuffPost.
But other Republicans said they would oppose a debt ceiling increase no matter what ― even in the unlikely scenario that Democrats dropped their efforts to pass the Build Back Better Act into law after taking back the Senate and White House in 2020.
“Probably not because they want open-ended spending. We want some kind of curb,” Sen. Richard Shelby (Ala.) said when asked about the hypothetical proposition.
Sen. Ron Johnson (Wis.) said he wouldn’t take that deal either because Democrats “can drop it and then bring it back up” after the debt ceiling is increased.
“Once you raise the debt limit then they’d be free to unilaterally spend a whole lot more money,” Cornyn added.
Democrats might use reconciliation to either raise the debt ceiling so high that it is never again an issue or make it equal to any excess spending Congress authorizes. But Democrats aren’t seriously considering such ideas, likely because not all 50 senators in the Democratic caucus would go for it.
For the most part, Republicans have said a federal default would be catastrophic and should be avoided, even though they themselves won’t lift a finger to help Democrats avoid it.
Investors avoided Treasury securities because of the threat of default. In 2013, Republicans wanted spending cuts to increase the ceiling. A default by the federal government would most likely spread through the financial system, resulting in increased borrowing costs for everyone.
But some lawmakers believe Treasury’s Oct. 18 deadline isn’t a firm one and that bad consequences would take longer to develop.
“What would happen would be the Treasury actually saying, ‘OK, we’re gonna have to prioritize how we’re paying the bills.’” Sen. Mike Rounds (R-S.D.) HuffPost. “None of us want to see that happen.”