Democrats mull disapproval process to break debt limit stalemate

Process would give the White House the ability to waive the federal borrowing cap unilaterally, but give Congress a veto

Treasury Secretary Janet L. Yellen, shown answering questions during a Senate Appropriations subcommittee hearing on June 23, has said the debt ceiling should be lifted soon to avoid default. (Greg Nash/Getty Images Pool Photo)
Treasury Secretary Janet L. Yellen, shown answering questions during a Senate Appropriations subcommittee hearing on June 23, has said the debt ceiling should be lifted soon to avoid default. (Greg Nash/Getty Images Pool Photo)
Posted August 27, 2021 at 6:48pm

House Democratic leaders are considering taking a page from a similar budget standoff a decade ago that led to the first-ever U.S. credit downgrade as they look for ways to lift or suspend the statutory debt ceiling amid near-unanimous GOP opposition.

The maneuver under consideration is a resolution of disapproval process for suspending the debt limit, according to sources with knowledge of the conversations.

The procedure would give the White House the ability to waive the federal borrowing cap unilaterally, but give Congress a veto if lawmakers could muster the votes to block it. Even then the president would have the option of vetoing the resolution of disapproval, and it would take two-thirds of both chambers to override a veto.

Doing so could, in theory, inoculate both Democrats and Republicans against charges that they voted directly for lifting the nation's credit card limit. Republicans could vote to reject a debt ceiling boost, and Democrats in tough races could vote either way knowing ultimately President Joe Biden wouldn't sign any legislation that led to a financial crisis.

Still, former top aides on both sides of the aisle were skeptical such a maneuver would work this time. They said GOP conservatives would still view the legislation as effectively a vote to raise or suspend the debt ceiling without fiscal restraints.

“I worry about whether that would pass muster with Senate Republicans because they could see it as facilitating a debt limit increase,” said Rohit Kumar, a former deputy chief of staff to Senate Minority Leader Mitch McConnell.

Similarly, a former Democratic Hill staffer said the debt ceiling represents a prime opportunity for the GOP to extract concessions from the majority, including on fiscal 2022 appropriations bills. “The debt ceiling provides them with significant leverage to force lower appropriated spending and I can’t imagine why they would relinquish that power,” this person said.

Aides to Speaker Nancy Pelosi, D-Calif., didn't respond to requests for comment Friday.

Shades of 2011

Kumar helped McConnell navigate the 2011 debt limit impasse, which ultimately led to a similar mechanism being enacted.

At that time GOP leaders were demanding spending curbs in exchange for their votes, and the deal they ultimately cut created a pathway for Republicans to avoid directly voting for a debt limit increase. President Barack Obama had to send lawmakers a certification that he was raising the debt ceiling through administrative authority; that triggered the resolution of disapproval process, in which simple majorities in each chamber could vote to override the debt limit boost.

On two occasions in late 2011 and early 2012, the Republican-controlled House adopted resolutions of disapproval. The law made it in order for lawmakers in either party to call up such resolutions, and McConnell did so in his chamber in 2011. But the Democratic-controlled Senate rejected it.

The same law established a total $2.4 trillion, 10-year deficit reduction requirement in exchange for a similar amount of borrowing cap increases. The cuts came through an initial set of lower discretionary spending caps followed by establishment of a "supercommittee" to come up with the rest; that effort didn't bear fruit and instead the automatic cuts known as sequesters kicked in.

Nonetheless, the frantic last-minute negotiating and apparent inability for either side to make the lasting compromises needed to get the nation's fiscal house in order led credit rating agency Standard & Poor's to downgrade U.S. debt.

'Flying to Las Vegas'

Senate Republicans have warned they will not support a debt limit increase, which needs 60 votes to pass in the 50-50 Senate. In general, Republicans argue that since Democrats used the partisan reconciliation process to pass a $1.9 trillion pandemic relief bill earlier this year and now will try to pass a $3.5 trillion reconciliation bill, they can take ownership of the debt limit as well.

“Democrats want Republicans to help them raise the debt limit so they can keep spending historic sums of money with zero Republican input and zero Republican votes," McConnell said on the Senate floor Aug. 9. “Imagine a friend tells you he’s flying to Las Vegas to blow all his money. He doesn’t care that you think it’s irresponsible and you aren’t invited to come. But he wants you to co-sign a loan for him before he leaves!"

McConnell was one of 46 Senate Republicans to sign a letter dated Aug. 10, as the Senate was nearing adoption of the budget resolution needed to unlock the reconciliation process, pledging not to vote to increase the debt ceiling. The only four GOP senators who didn't sign were Maine's Susan Collins, Alaska's Lisa Murkowski, Louisiana's John Kennedy and Alabama's Richard C. Shelby.

Democrats favor a clean debt limit increase without any conditions attached. Obama was generally able to win debt limit suspensions without conditions following the 2011 fight. And Democrats point out they supported debt limit suspensions when President Donald Trump was in office.

Unless the two parties come together on raising the debt limit, the government would face the possibility of not being able to meet its financial obligations after special accounting procedures used by Treasury to extend borrowing capability are exhausted. That could come in October or November, according to the Congressional Budget Office, though Treasury Secretary Janet Yellen has warned Congress must act sooner because of large benefit payments due Oct. 1.

If the debt ceiling isn't raised or suspended in time, Treasury would be forced to fall back on whatever cash is left on hand and incoming revenue on a day-to-day basis.

Officials could eventually be forced into difficult decisions such as whether to pay interest on debts owed to bondholders, or to pay military salaries or Social Security benefits, for instance. Interest rates on government debt would likely rise, rippling throughout the economy to borrowing costs for everything from mortgages to credit cards.

Democrats are likely to argue for a debt limit suspension to be attached to a stopgap spending bill that Congress will have to pass by Sept. 30 to avoid a partial government shutdown. Even if Congress passed a stopgap bill with a debt limit suspension attached, it would likely be a short-term extension lasting perhaps into early next year.

Congress would then have to tackle the debt limit again — in an election year.

It's also possible Republicans would withhold support for an initial stopgap funding measure if a debt limit suspension is attached, especially if they anticipate extraordinary measures would last long enough to address the debt limit later in the year if estimated tax payments come in higher than expected on Sept. 15. A government shutdown, while disruptive, is considered less catastrophic than default on U.S. obligations.

Raising the debt limit also is a sensitive issue among Democrats, particularly those representing swing states with tough races next year.

Democrats could have included reconciliation instructions to raise the debt limit in the budget resolution but chose not to in part to avoid taking full responsibility for a debt limit increase.

They also declined to use a House rule that lets them avoid a direct vote on a debt limit suspension, by automatically sending it to the Senate upon adoption of the budget resolution earlier this week. Using that mechanism could have opened up House Democrats to critiques that they unilaterally suspended the debt ceiling in a measure that the Senate wouldn't be able to pass due to its 60-vote threshold.

'Quite nervous'

Kumar, who's now Washington national tax services co-leader at PwC, said Republicans had more leverage over the debt limit then, since they controlled the House at the time.

While 2011 marked the most fraught debt ceiling negotiation in history so far, some experts think this one may be even more difficult.

“I’m not sure what the path forward is,” Kumar said. “I am quite nervous about all this.”