Democrats mull keeping debt limit out of budget reconciliation

Move could spare party centrists from political attacks, but carries other disadvantages

Former Speaker John A. Boehner, R-Ohio, negotiated the first of several bipartisan spending caps and debt limit deals. (Bill Clark/CQ Roll Call file photo)
Former Speaker John A. Boehner, R-Ohio, negotiated the first of several bipartisan spending caps and debt limit deals. (Bill Clark/CQ Roll Call file photo)
Posted July 12, 2021 at 7:27pm

Democrats are leaning toward lifting the Treasury Department’s borrowing cap outside of the partisan budget reconciliation process, according to sources familiar with the discussions, meaning they’d need at least 10 Senate Republicans on board.

That’s a daunting task, however, given that the minority party is likely to try to make the debt limit vote a referendum on Democrats’ fiscal largesse. Although debt limit legislation was enacted twice in 2017 and 2018 under unified GOP control of government, and once in 2019 when Republicans controlled the Senate and White House, such votes are typically a political cudgel if they all come from one side of the aisle.

To attract Republicans, debt limit legislation would likely need to be attached to some other “must pass” bill coming due by this fall, such as stopgap funding to avert a partial government shutdown after the current fiscal year ends Sept. 30.

No final decisions have been made, but moving a debt limit boost separately from reconciliation could give Democratic centrists cover since that route would require GOP support. The prospect of carrying a debt ceiling increase on their own could give moderates pause, given that their Republican opponents could use that vote against them in next year’s midterms.

That hesitancy in turn could pose hurdles for adopting a budget resolution, if it contains instructions to draft a debt limit increase bill as part of a filibuster-proof reconciliation package.

Democrats are planning to use the budget process to enact big parts of President Joe Biden’s agenda that aren’t included in a separate bipartisan infrastructure plan, including spending on clean energy programs, child care, housing, health care and paid family leave. With only a four-vote margin this month in the House, and no room for error in the 50-50 Senate, Democratic leaders don’t want to leave anything to chance.

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“To put the debt ceiling in there just gives the Republicans an opportunity to attack them next year in the election,” said Tom Kahn, a former top Democratic aide on the House Budget Committee.

Second, while a parliamentary opinion on the topic hasn’t been rendered, there’s a view among budget experts that the 1974 law creating the reconciliation process requires a debt limit bill to cite a specific dollar amount. The law says reconciliation can be used to “specify the amounts by which the statutory limit on the public debt is to be changed and direct the committee having jurisdiction to recommend such change.”

But since 2013, lawmakers have shifted to “suspending” the debt ceiling until a certain date, which has the same effect but allows lawmakers to avoid voting to “raise” the debt limit by hundreds of billions or trillions of dollars. The regular order process would allow Congress to use another suspension, rather than a straight dollar amount, which seems likely to be required under reconciliation.

The problem with regular order, however, is Senate Republicans seem fairly unified around extracting conditions in exchange for their votes on the debt limit. The Senate GOP Conference adopted a nonbinding rule calling for unspecified “reforms” to federal spending as part of any debt limit bill, though several have acknowledged deep budget cuts are unlikely as part of that process.

Tying the debt limit to fiscal 2022 appropriations has one big disadvantage, however: It gives Republicans leverage, since spending bills need 60 votes to advance in the Senate. While the House Appropriations Committee has been busy moving bills at a $1.5 trillion ceiling, increases over the current year are heavily skewed toward nondefense programs, which top Republicans oppose.

“By putting it into an appropriations bill, you then give the Republicans an opportunity for negotiations that will lower the amount of discretionary spending ultimately below what the budget resolution provides,” said Kahn, who’s now a faculty fellow at the Center for Congressional and Presidential Studies at American University.

Moving the debt limit discussion into the fiscal 2022 appropriations caps would follow the pattern of recent years, however.

In 2015, 2018 and 2019, budget deals were enacted that both set new, bipartisan spending caps for defense and nondefense discretionary programs and suspended the debt ceiling. In all three cases, it was the threat of default that spurred lawmakers and the White House to the negotiating table on appropriations.

Uncertain timeline

Treasury Secretary Janet L. Yellen has warned the government could run out of borrowing room in August if the debt limit is not raised by then, though other forecasters say accounting measures used to extend borrowing are more likely to last until sometime in the fall.

Last week, the Bipartisan Policy Center, a think tank, said it was too difficult to forecast when Congress would need to act or risk a potentially catastrophic default on U.S. obligations.

The current debt limit suspension ends Saturday, July 31. The debt limit will reset on Aug. 2 to the total amount of debt outstanding on that day. But Treasury is expected to have a fairly large cash stockpile at that point, plus the use of so-called extraordinary measures — accounting tools to create more borrowing room — to stave off default for some undetermined period.

Reconciliation has been used four times to raise the debt limit — the last time in 1997.

Earlier this year, some Democrats saw reconciliation as the best bet to deal with the debt limit, since it would allow the borrowing ceiling to be increased with a simple majority vote in the Senate. But now, the stronger bet is that the Senate Budget Committee will not put reconciliation instructions to raise the debt limit in the fiscal 2022 budget resolution, several people familiar with the process said.

Under House rules in place since 2019, adoption of a budget resolution in that chamber automatically spins off a measure to the Senate deeming the debt limit to have been suspended for the first fiscal year covered by the budget resolution without a separate vote. That would mean a suspension until Sept. 30, 2022, with extraordinary measures potentially pushing off the need for action until after the midterm elections.

Although that procedure would shield House moderates from voting directly on a debt limit bill, the Senate would still need to take it up and get over the 60-vote hurdle. It also poses other procedural challenges if Democrats want to attach it to some other bill in the Senate, not to mention the need to vote again in the House if the legislation is amended and hasn’t yet been voted on in that chamber.