Congress is barreling toward a fight as soon as next month over raising the debt ceiling, creating a huge challenge for President Biden and Democratic leaders in Congress.
Under a 2019 deal during the Trump administration, Congress agreed to let the government borrow through July 31. The Treasury Department at that point can take what’s known as extraordinary measures to keep the government solvent, but it’s unclear how long it will be able to do this.
In the Senate, raising the debt ceiling is subject to the filibuster, meaning Democrats will need GOP support.
But GOP senators say they don’t expect their caucus to provide the 10 votes needed to hike the borrowing limit, which would set up a high-profile financial showdown with dramatic implications for the world’s economy.
“I’d say it’s unlikely,” said Sen. John Thune (S.D.), the No. 2 Senate Republican, about the likelihood that enough Republican support raising the debt ceiling.
Sen. Roy Blunt (R-Mo.), another member of leadership, argued that lawmakers typically use the debt ceiling “to try to figure out some mechanism to control future debt.”
“Probably the Budget Control Act was the most effective of all of those things but this is the first year in 10 years that we haven’t had a spending cap to try to deal with. … I think we’ll have that same kind of debate again,” Blunt said, referring to a 2011 law that set top-line spending limits through fiscal 2021.
“I would think it’s likely to get 10 Republicans you’re going to have to do some kind of spending reform to get a debt ceiling increase,” he added.
It’s not just Republican senators.
Rep. Jim Banks (R-Ind.), the chairman of the House Republican Study Committee, sent a memo to his members outlining demands they could make in exchange for raising the debt limit later this year.
“Given the worsening fiscal outlook for the federal government and at least three-and-a-half more years of President Biden proposing trillions and trillions of dollars of deficit-financed spending, it is more important than ever for conservatives to reclaim the debt limit as a tool to highlight and force action on our nation’s spending problem,” Banks wrote.
The options outlined by Banks include rejecting suspending the debt limit; trying to prevent a debt hike from being linked to a spending package — a tactic frequently taken by leadership to try to make it harder to vote “no”; or trying to require spending offsets.
It’s the latest sign from Republicans that they are bracing for an all-out fight over any attempt by Democrats to increase the debt ceiling without making spending cuts or reforms, even after taking a relatively hands-off approach to checking the debt under Trump.
Senate Republicans offered symbolic support earlier this year during a debate on their conference rules to offset any increases in the debt ceiling with spending reforms, in a move pushed for by Sen. Rick Scott (R-Fla.), who chairs the Senate GOP campaign arm.
Thune added that some Republicans might vote for raising the debt ceiling if some reforms are included.
“Most Republicans in order to deliver a vote for a debt ceiling increase are going to want to deal with the debt,” Thune said.
Democrats are brushing off the threats, warning that it would backfire on Republicans politically by threatening to roil the markets and injecting a huge dose of fiscal uncertainty just as the country is coming out of a year-plus pandemic that put the economy on shaky grounds.
Sen. Chris Murphy (D-Conn.) warned that it would be “political suicide” if Republicans risked a debt default by refusing to help raise or suspend the debt ceiling.
“I’m not sure Republicans are going to want to risk the catastrophe that would occur,” Murphy said. “I think we’ve gotten to a good place where we understand you can’t negotiate on the debt ceiling.”
When, exactly, Congress will have to deal with the debt ceiling fight is unclear.
The debt ceiling will automatically kick back in Aug. 1. It’s not an ideal time for Congress, given that it comes amid the summer recess season when lawmakers are itching to get out of town if they haven’t dispersed from Washington already.
The House is scheduled to leave Washington at the end of July and not hold votes again until Sept. 20. The Senate, meanwhile, is scheduled to leave Aug. 6 and return Sept. 13.
The Bipartisan Policy Center is estimating that the so-called X date, or the point at which the U.S. government will be unable to fully meet its financial obligations on time, to arrive at some point in the fall, based on Treasury’s announcement about what its cash on hand will be Aug. 1.
The Treasury Department hasn’t yet put a firm timeline on how long it expects that it will be able to use extraordinary measures to delay running up against the country’s borrowing limit. A spokesperson on Friday pointed The Hill back to guidance it released last month on its latest quarterly statement.
“In light of the substantial COVID-related uncertainty about receipts and outlays in the coming months, it is very difficult to predict how long extraordinary measures might last. Treasury is evaluating a range of potential scenarios, including some in which extraordinary measures could be exhausted much more quickly than in prior debt limit episodes,” Brian Smith, the deputy assistant secretary for federal finance, said in the quarterly guidance.
Though the debt fight has largely been on the back burner, Democrats are increasingly aware that they are barreling toward the deadline.
Asked about the guidance from Treasury, Senate Majority Leader Charles Schumer (D-N.Y.) told reporters last month that Congress “should get something done in the right way.”
“You know, I think it’s an absolute disgrace that the Republicans are using the debt ceiling, which deals with the financial security, as sort of a political issue,” Schumer said.
The issue also came up in an unrelated meeting among senators this week as they discussed the legislative calendar and upcoming deadlines.
One option, if Republicans dig in against helping raise the debt ceiling, could be to try to deal with it through reconciliation, a budget process that allows certain bills to bypass the Senate’s 60-vote legislative filibuster.
Democrats are privately discussing what to put in their next package with Senate Budget Committee Chairman Bernie Sanders (I-Vt.) telling reporters that he hasn’t yet decided if they will include the debt ceiling.
But one hurdle is that the timing for both when a Democratic-only infrastructure package could pass the Senate and when the debt ceiling fight will ripen are in flux. If Democrats bank on sticking the debt ceiling hike into the infrastructure package, and then those talks stall, that could leave them without a vehicle.
If Treasury determines that it needs Congress to act sooner, an infrastructure package might not yet be ready. Though Schumer has indicated that he wants to pass a potential bipartisan bill and the budget resolution that unlocks a second Democratic-only bill in July, that could still leave passing the second infrastructure bill itself until the fall.
“It’s not clear reconciliation is going to be all done and wrapped up by July,” Murphy said, while acknowledging that “it’s easier to get a debt ceiling bill done if it’s built into something bigger.”