Senate leaders reached a bipartisan agreement Wednesday to defuse the impending debt limit crisis by allowing for a short-term increase in the statutory borrowing cap while lawmakers negotiate a longer-term solution.
Democrats said they would agree to an offer from Minority Leader Mitch McConnell that would pave the way for an increase in the debt limit into December. But the two parties still disagreed on any long-term strategy.
“It would have been a disaster if this did not happen, and I’m glad that Mitch McConnell finally conceded the point that we have to pay our debts incurred under Trump,” said Budget Chairman Bernie Sanders, a Vermont independent who caucuses with Democrats. “And let’s get this done as quickly as possible.”
Sanders said Democrats would not accept McConnell’s insistence on passing any long-term debt limit suspension through the budget reconciliation process — even with extra time to complete it. “There’s not going to be reconciliation,” he said.
Illinois Sen. Tammy Duckworth was among the Democrats who characterized the McConnell offer as a “fold” on the part of the Senate GOP. “It’s great that he’s folded, and we’re going to move our agenda, and we’re going to take care of the debt ceiling, and then we’re going to go on and pass infrastructure,” she told reporters.
The decision by Senate Democrats to punt on the debt ceiling issue came as White House Press Secretary Jen Psaki said the Biden administration would prefer to avoid a short-term measure. “We don’t need to kick the can. We don’t need to go through a cumbersome process,” Psaki said, although she did not rule out agreeing to such a deal as an alternative to default.
Sen. Christopher S. Murphy, D-Conn., who hours earlier had dismissed McConnell’s offer as a “terrible idea,” said using reconciliation to raise the debt limit would set a “horrendous” precedent.
“You have to hope that the debt ceiling comes up at a moment when you have a reconciliation available,” Murphy said, pointing to the limited times that the process can be used under budget law. “The bottom line is Republicans knew they were going to get blamed for this if they didn’t come to the table with a proposal that at least gets us to December. Hopefully, in December, they’ll realize that doing this three months at a time is not in their interest.”
But a short-term debt limit fix, the details of which were still being negotiated, could nonetheless calm jittery financial markets and de-escalate a political crisis in Washington. The government would be unable to pay all its bills after Oct. 18 unless the statutory debt ceiling is lifted, Treasury Secretary Janet L. Yellen has warned.
Democrats had been pushing legislation that would suspend the debt limit through Dec. 16, 2022. But McConnell’s offer called for raising the debt limit in the short term by a specific dollar amount, which Senate Finance ranking member Michael D. Crapo, R-Idaho, said could be about $300 billion.
Michigan Sen. Debbie Stabenow, a member of Democratic leadership, said her party was still negotiating whether to agree to an increase in dollars or a suspension for a limited period of time.
Late Wednesday, McConnell told reporters the two sides were “trading paper, which you always do at this point.” He said negotiations over the legislative details would “finish up soon.”
Just after midnight, Senate Majority Leader Charles E. Schumer said he and McConnell hadn't yet agreed on the details but were nearing a deal.
"We’re making good progress, we’re not there yet, but I hope we can come to an agreement tomorrow morning," Schumer said.
McConnell, who had insisted for months that Democrats raise the debt limit on their own through the reconciliation process, broke the partisan logjam with a statement Wednesday promising not to filibuster a short-term debt limit increase. He also promised not to use procedural tools to drag out the reconciliation process he wants Democrats to use for a longer-term solution.
“This will moot Democrats’ excuses about the time crunch they created and give the unified Democratic government more than enough time to pass stand-alone debt limit legislation through reconciliation,” McConnell said.
Democrats have resisted McConnell’s push for them to use the filibuster-proof reconciliation process for the debt limit, saying it would be too cumbersome and time-consuming. It would require, at minimum, votes in the House and Senate on a revised fiscal 2022 budget resolution, followed by votes in both chambers on the debt limit reconciliation bill itself.
McConnell’s offer would in theory truncate the procedural steps, possibly by avoiding a lengthy list of amendments during a Senate Budget Committee markup and on the floor during the “vote-a-rama” sessions allowed under budget rules.
It wasn't yet clear whether Schumer would need to file cloture on the compromise plan, once introduced. But there were early warning signs that not all senators on McConnell's side of the aisle were on board.
Late Wednesday, Senate Budget ranking member Lindsey Graham, R-S.C., hinted at opposing the short-term measure in a statement.
"If Democrats want to raise the debt ceiling they can use the reconciliation process," he said. "If an expedited reconciliation process is not good enough, then Democrats should own it and change the rules."
If the final text isn't ready until Thursday, even if cloture is invoked final passage might have to wait until the weekend unless there's an agreement to speed things up.
No filibuster ‘carve-out’
Changing the rules became largely a moot point earlier Wednesday.
The GOP offer came hours after West Virginia Democrat Joe Manchin III effectively nixed an idea brewing among many Democrats to waive the filibuster rules in order to pass a debt limit suspension over Republican opposition.
Opposition from Manchin alone would have been enough to prevent Democrats in the evenly divided Senate from mustering enough votes to change the filibuster rules, assuming all 50 Republicans opposed the move.
“I’ve been very, very clear where I stand … on the filibuster,” Manchin told reporters Wednesday. “I don’t have to repeat that. I’ve been very clear. Nothing changes.”
Manchin, whose state voted for Republican President Donald Trump last year by nearly 40 points, called on McConnell and Senate Majority Leader Charles E. Schumer to work out a solution to the debt limit crisis.
“Our leadership has the responsibility to lead,” he said. “And that’s what I’m asking and imploring them to do.”
Republicans earlier had showed no signs of giving ground on their demand that Democrats use the budget reconciliation process to lift the debt ceiling on their own. While the votes of a few moderate Republicans remained unclear, there was little chance that Democrats would get 10 Republicans on their side for cloture on the longer-term debt limit measure.
A longer-term solution through reconciliation would likely involve a much higher figure than $300 billion. Under the complicated procedural rules of reconciliation, Democrats would likely need to increase the debt limit to a specified dollar amount, instead of suspending it for a certain period of time.
The Bipartisan Policy Center, a think tank, estimated that even without any further deficit-increasing legislation or major economic changes, suspending the debt ceiling through Dec. 16, 2022, as in the House-passed bill, would require about $2.4 trillion in added debt just from prior fiscal decisions.
Sen. Mark Warner, D-Va., said there are “grave concerns” with citing a new, higher debt ceiling amount in the longer-term legislation. “I’d like to know what that dollar amount can be,” he said. “I know a lot of the Democrats don’t want to do that at all.”
Whatever the outcome, some resolution is needed in the coming days.
The BPC on Wednesday said it’s possible Treasury could start missing payments shortly after Oct. 19, though in a best-case scenario they could make it until Nov. 2.
If Treasury were to exhaust accounting tricks and cash on hand on Oct. 19, the BPC offered a glimpse of what could be at stake, depending on how long the impasse lasts:
- Unemployment insurance benefits scheduled for Oct. 20 could be delayed by five days.
- Food stamp benefits due Oct. 25 would be delayed by a week.
- Federal employee salaries due to be paid Oct. 29 could be postponed by 11 days.
- Nov. 1 military paychecks, Medicare reimbursements and veterans benefits could be delayed to Nov. 19.
If they don’t use reconciliation, Democrats have few options. Some have pointed to the 14th Amendment, which says the full faith and credit of the United States “shall not be questioned.” There has been discussion of using that amendment to argue that the president has executive authority to ignore the debt limit or suspend it on his own, although such a move would almost surely prompt a court challenge.
“I’m not saying the 14th Amendment itself is a solution,” said Sen. Tim Kaine, D-Va. “But what I’m saying is, since we’ve all pledged to support and defend the Constitution of the United States, and the 14th Amendment says the validity of public debt shall not be questioned, that tells me that I need to take action even if Republicans won’t.”
President Joe Biden met Wednesday with a group of CEOs from corporations such as JPMorgan Chase & Co., Intel Corp. and Raytheon Technologies, as well as trade groups AARP and the National Association of Realtors to discuss debt limit impacts on the economy.
“We should get rid of the debt ceiling,” JPMorgan Chase CEO Jamie Dimon said, appearing remotely during the meeting. “We don’t need to have this kind of brinksmanship every couple of years.”
Paul M. Krawzak, Lindsey McPherson and Jessica Wehrman contributed to this report.