Senate Agrees To Raise Debt Ceiling, Avoiding ‘Catastrophic’ Default—For Now

By Nicholas Reimann, Forbes Staff

Topline

Senate Republicans and Democrats have agreed to move forward with a plan to keep the U.S. from defaulting on its debt until at least early December, Senate Majority Leader Chuck Schumer (D-N.Y.) said Thursday morning, ending a lengthy stalemate ahead of a potential economic disaster.

Sen. Mitch McConnell (R-Ky.) chats with Sen. Chuck Schumer (D-N.Y.) during a Congressional Gold Medal presentation ceremony on October 25, 2017 in Washington. (Photo by Alex Wong/Getty Images) Getty Images

Key Facts

Democrats agreed to an offer from Senate Minority Leader Mitch McConnell (R-Ky.) for a lifting of the debt ceiling sufficient to maintain current spending levels for a short period.

McConnell insists Democrats pass a long-term raise to the debt ceiling through the budget reconciliation process—a complex and lengthy undertaking that won't require any Republican support.

Democrats have repeatedly said they will not raise the debt ceiling through reconciliation, meaning a similar standoff over the debt ceiling could take place again in weeks.

In a statement on Wednesday, McConnell said the only way Republicans would engage in a "traditional bipartisan" conversation would be if Democrats slash their proposed $3.5 trillion spending package.

Treasury Secretary Janet Yellen said if the debt ceiling isn't raised by October 18, the U.S. will default on its debts for the first time in history, leading to "catastrophic" economic impacts.

Crucial Quote

“It's our hope that we can get this done as early as today,” Schumer said of a vote on the agreement.

Key Background

McConnell has said Democrats should act alone on raising the debt ceiling since they control both chambers of Congress and the White House. But before McConnell's offer, Democrats had essentially cut off their options for acting without Republican support. Trying to raise the debt ceiling through the budget reconciliation process would have been essentially impossible to accomplish before the October 18 deadline, Schumer said. Democrats could also eliminate the filibuster when it comes to votes on raising the debt ceiling—an idea President Joe Biden floated Tuesday. But doing so would require the support of every Senate Democrat, and centrist Joe Manchin of West Virginia has already said he won't support dropping the filibuster. 

What To Watch For

Democrats in Congress are also juggling the $3.5 trillion spending package and a $1.2 trillion infrastructure bill, which are being held up by a standoff between centrist Democrats in the Senate and progressive Democrats in the House. House progressives have vowed to withhold support for the infrastructure bill, which has already passed the Senate, unless it’s accompanied by a vote to pass the social spending package, which centrist senators like Manchin and Arizona's Kyrsten Sinema have said they oppose. Democrats are seeking to pass the $3.5 trillion legislation in the Senate through the reconciliation process, since it has no Republican support, but the 50-50 split between parties in the chamber means the bill wouldn't pass if even a single Democrat voted against it. Manchin has set a cap of $1.5 trillion in spending for the bill. President Joe Biden said he believes he can reach a deal with the senators on a more expensive package, in the range of $1.9 trillion to $2.2 trillion.

Further Reading

McConnell Offers Democrats An Emergency Debt Limit Increase Through December To Avert Historic Default (Forbes)

Republicans Block Democratic Effort To Raise The Debt Ceiling As Officials Warn Of Economic Catastrophe (Forbes)

It's A 'Gimmick': Yellen Opposes Minting $1 Trillion Coin To Save The United States From Historic Debt Default (Forbes)

A Debt-Ceiling Showdown (The New York Times)

Biden sets $1.9 - $2.2 trillion price range for social safety net bill in call with House progressives (CBS News)

Manchin Sets $1.5 Trillion Ceiling For Democrats’ Reconciliation Bill (Forbes)


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