Democrats insist they won’t back down on debt ceiling
Senate Democrats on Tuesday insisted they would not back down to Senate Minority Leader Mitch McConnell (R-Ky.) in a high-stakes standoff over the federal debt limit.
With just days to go before a potential debt default, which would be the first in U.S. history, Democrats emerged from a luncheon strategy meeting saying there was no way they’d use the lengthy budget reconciliation process to raise the debt ceiling.
The forceful opposition came from lawmakers like Sen. Tim Kaine (D-Va.) who have made clear that Democrats, with their control of the White House and Congress, cannot let the debt limit deadline lapse.
“We’re not doing it on reconciliation … it’s too complicated,” Kaine said.
Other Democrats said there simply isn’t enough time to go the budget reconciliation route.
“It’s impossible to do that now,” said Sen. Sherrod Brown (D-Ohio), chairman of the Senate Banking Committee. “There’s too many pitfalls, it takes too long.”
Sen. Elizabeth Warren (D-Mass.) said Democrats were willing to use “every tool we can” but that there wasn’t enough time to raise the debt ceiling through reconciliation.
“There is not enough time. It will not work without Republican cooperation, and they are not giving us any cooperation,” she said.
McConnell for weeks has said Republicans will have no part in raising or suspending the debt ceiling and that Democrats must use the budget reconciliation process to create a special legislative vehicle that would raise the debt limit with only Democratic votes.
But Senate Majority Leader Charles Schumer (D-N.Y.) says that could take two weeks — maybe even longer since just one senator could drag out the proceedings — and would require holding two lengthy vote-a-ramas, when senators can offer an unlimited number of amendments that require floor votes.
“Reconciliation is a drawn-out, convoluted and risky process,” Schumer said on Tuesday.
The entrenchment on both sides is making some members of each caucus nervous as Treasury Secretary Janet Yellen ramps up calls for Congress to raise or suspend the debt limit by Oct. 18 to avoid a financial catastrophe that could cripple the U.S. economy.
Some Democratic senators are discussing the possibility of carving out a special exception to the filibuster that would allow the debt ceiling to be suspended with just 50 votes. That would require overruling the Senate parliamentarian and creating a new precedent — a controversial tactic known as the nuclear option.
President Biden, asked if Democrats were considering a carveout for the debt ceiling, told reporters at the White House on Tuesday that it was a “real possibility.”
But centrist Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.) have made clear this year that they do not support gutting the Senate’s filibuster rule, which requires 60 votes for most legislation.
McConnell on Tuesday argued that Democrats have known for months that Republicans would not give them any help to extend the nation’s borrowing authority, which formally expired at the end of July.
“I’ve said in July, I’ve said in August, I’ve said in September, there’s a clear path to achieving the debt ceiling, which must happen — America must not ever default — and doing it with Democrats only,” he said.
McConnell helped negotiate a deal with then-Vice President Biden and other Democratic leaders in 2011 to raise the debt limit during a similar standoff but says the current situation is different because Democrats control the White House and both chambers of Congress.
He told reporters Tuesday that he has not spoken to Biden directly about the issue.
Republicans say they don’t want to make it easier for Democrats to raise the debt ceiling when they know the next major spending bill on the floor will be a social spending package ranging anywhere from $1.5 trillion to $3.5 trillion that they plan to pass without any GOP votes.
“Reconciliation is the hard way and this should be done the hard way. We’re talking about the biggest expansion of government, the biggest tax increase in American history. It ought to be hard, not easy,” said Senate Minority Whip John Thune (R-S.D.).
Schumer has scheduled a vote on Wednesday that will need the support of 10 Senate Republicans to advance legislation to suspend the debt ceiling until December 2022.
He says if GOP senators vote to end a filibuster and allow the bill to come up for final up-or-down vote, Democrats can pass the debt limit suspension on their own. He argues a potential crisis can be avoided if McConnell simply allows 10 members of his caucus to vote with Democrats to overcome the 60-vote procedural hurdle.
“Tomorrow’s vote is a chance for some Republican senators to show some independence from the extreme members of their conference who are running for president,” Schumer told reporters after meeting with his caucus.
“All we need is 10 Republicans to vote with us, then none of them have to vote to raise the debt ceiling,” he said, warning a potential credit downgrade “is hovering over us.”
“It’s not too late, but it’s getting dangerously close. There’s still time — still time for Republicans to get out of the way and allow this bill to pass with a simple majority vote,” he added.
He accused “extremists on the hard right” of wanting the nation to default in order to hurt Biden.
Republicans say there will not be 10 votes on their side to dispense with a filibuster on Wednesday, meaning the impasse will likely head into the weekend and probably next week.
Schumer has indicated he’s willing to cancel the October recess, scheduled for Oct. 11 to 15, to buy more time on the debt ceiling debate.
“We’re going to stay here until we get this done,” he announced after meeting with his caucus for lunch.
The time crunch has numerous Democrats warning that immediate action is needed.
Sen. Mark Warner (D-Va.), a member of the Senate Budget Committee, said using reconciliation would put the government in danger of defaulting on its debt because there are less than two weeks until the deadline.
“I do not think it is possible on a timeline that would not jeopardize the full faith and credit of the United States. … We’re in the danger zone right now,” he said.
Fitch Ratings said Friday that a default would likely cost the U.S. its AAA credit rating and raise serious questions about the country’s ability to anchor the global financial system.
If the Treasury Department is forced to prioritize debt payments with its remaining cash, it “would lead to non-payment or delayed payment of other obligations, which would likely undermine the U.S.’s ‘AAA’ status,” the ratings agency wrote.
Moody’s expressed a greater deal of confidence that the U.S. would avoid a default in a Tuesday research note, but hinged that assumption on Democrats using budget reconciliation as a last resort. While Moody’s expected a potential default to be resolved quickly, it warned the U.S. would no longer deserve a AAA rating if Treasury had to prioritize payments.
Even so, financial markets have largely kept their cool amid escalating tensions on Capitol Hill, reflecting confidence on Wall Street that a crisis will be averted. While the stock market has been volatile throughout September after months of solid gains and bond yields have increased, financial experts say those speed bumps were largely due to concerns about the economic recovery from the pandemic and inflation.
The Dow Jones Industrial Average, Nasdaq composite and S&P 500 all ended Tuesday with gains across nearly every sector of the economy after steep losses Monday.