McConnell offers short-term lift for debt limit

McConnell offers short-term lift for debt limit
McConnell offers short term lift for debt limit

Senate Minority Leader Mitch McConnell on Wednesday made a new offer to the Democratic-run Senate as lawmakers struggled to end a standoff over the federal borrowing limit. Republicans will “allow Democrats to use normal procedures to pass an emergency debt limit extension at a fixed dollar amount to cover current spending levels into December,” McConnell, a Kentucky Republican, said in a statement.

“This will moot Democrats’ excuses about the time crunch they created and give the unified Democratic government more than enough time to pass standalone debt limit legislation through reconciliation.” This year’s standoff has occurred as McConnell and other Republicans have argued for months that Democratic lawmakers ought to go it alone to lift the debt ceiling through a process known as budget reconciliation, as that’s how they passed a stimulus bill in March and how they’re working to pass their sweeping social-spending package. Democrats have said again and again that the increase should happen through a standard process and criticized Republicans for preventing that, adding that acting through reconciliation is cumbersome and risky. Earlier Wednesday, McConnell in a floor speech offered to limit Republican delaying maneuvers if Senate Democrats address the debt ceiling through reconciliation. The Senate also has been poised to vote Wednesday on ending debate on a House-passed bill that would suspend the federal borrowing limit, even as Republican senators were expected to put up another roadblock. The potential for a U.S. government default due to the debt-ceiling standoff has spurred President Joe Biden to warn about possible major economic damage, and it has left analysts outlining likely solutions. “Unlike 2011, there are obvious off ramps here,” said Chris Krueger, managing director at Cowen Washington Research Group, in a note Wednesday. He was referring to a debt-limit impasse 10 years ago that resulted in a downgrade for U.S. sovereign debt. Treasury Secretary Janet Yellen last week cautioned the Treasury Department is likely to exhaust extraordinary measures to keep from defaulting on its debt by Oct. 18 if Congress has not raised or suspended the debt limit. The Congressional Budget Office has given a later deadline, saying the government most likely will run out of cash near the end of October or start of November if lawmakers fail to act. There are four routes that are most likely to provide a resolution, according to Cowen’s Krueger. The first is Democrats decide to use reconciliation after all, and the second is Republicans give in and stop blocking action through the filibuster, the analyst said. The Senate’s filibuster rule requires 60 votes to end debate on most items and allows the minority party to stymie the majority’s efforts. A third route would be “Senate Democrats could move to eliminate the 60-vote filibuster for debt limit increases,” Krueger wrote. “This would track w/ the recent, targeted weakening of the filibuster (confirmations, judges & Supreme Court), though would be the first on legislative matters in recent memory.” Biden told reporters late Tuesday that getting rid of the filibuster for this situation is “a real possibility.” But a key moderate Democratic senator, West Virginia’s Joe Manchin, reiterated on Wednesday that he’s opposed to scrapping the filibuster, as he called for Senate Majority Leader Chuck Schumer and McConnell to “work this out.” A fourth solution, Krueger said, would involve “unilateral options,” such as invoking the 14th Amendment, which states the validity of the public debt shall not be questioned. Other unilateral options would be minting a $1 trillion coin or prioritization, which refers to the Treasury choosing who gets paid. Yellen has dismissed the coin idea, saying it is the equivalent of “asking the Federal Reserve to print money to cover deficits that Congress is unwilling to cover.” A Democratic senator who requested anonymity to speak frankly about Schumer’s tough position told the Hill newspaper that the New York Democrat likely will opt to raise the debt limit through reconciliation. The lawmaker said: “I don’t know, other than reconciliation, how we do it. I think if it comes to that, we should just do it. No one’s going to remember how it’s done in a month but they will remember if it’s not done.” The Senate is split 50-50, with Democrats in control only because Vice President Kamala Harris can cast tiebreaking votes. “There would be potential for time agreements to wrap it up, well before any danger,” the Kentucky Republican said. Biden met on Wednesday with business leaders on the debt-limit standoff, including the CEOs of J.P. Morgan Chase
and Nasdaq
U.S. stocks

turned positive on Wednesday afternoon as traders tracked the debt-ceiling drama in Washington. Now read: What happens if the U.S. defaults on its debt?

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