Republicans have vowed not to support increasing federal borrowing limit, despite warnings of economic “catastrophe”
WASHINGTON – Democratic congressional leaders on Monday unveiled plans to suspend the country’s borrowing limit, following a White House warning of “economic disaster” unless that limit is raised.
The legislation would also fund the government until the end of the year after the current budget expires on September 30.
But the fate of the plan is unclear as Republicans have pledged to suspend support for raising the debt ceiling, which is needed to fund spending already approved by lawmakers, including the massive bailouts rolled out during the Covid-19 pandemic.
“The American people expect our fellow Republicans to take responsibility and pay off the debts they proudly helped incur,” said Senate Democratic Majority Leader Chuck Schumer and House Speaker Nancy Pelosi in a joint statement.
They warned that “a forced reckless default by Republicans could plunge the country into a recession.”
Democrats have a majority in both houses of Congress, but the slim margin in the Senate means they’ll need Republicans’ support to get it through, as a single senator can block any legislation with fewer than 60 votes.
The measure would suspend the debt limit until December 2022 – after the midterm legislative elections.
It would also allow the government to continue operating until the end of the year while lawmakers continue to debate two massive spending bills – an eight-year, $ 1.2 trillion infrastructure program and a 10-year, $ 3.5 trillion package with a host of social programs, largely paid for by reversing tax cuts.
Schumer and Pelosi said the measure unveiled on Monday would avoid “an unnecessary government shutdown”, and called it “legislation to be passed”.
It will also include funds for disaster relief and resettlement of Afghan evacuees, with the White House asking for $ 20 billion for hurricane and wildfire aid and $ 6 billion for tens of thousands of people. Afghan refugees.
“We look forward to passing this crucial legislation with bipartisan support from both houses and sending it to the president’s office in the coming weeks,” they said.
But Republican Senate Leader Mitch McConnell once again said Democrats should go it alone.
“They just want bipartisan coverage so they can pivot as fast as possible to get through a historically reckless tax and spending spree on a pure party line vote,” he said on Twitter.
This is in stark contrast to his stance in 2019, when Republican Donald Trump was president and McConnell argued that not raising the borrowing limit “would be a disaster.”
– ‘Shame shame’ –
Schumer called McConnell’s current position “crass, cowardly.”
“Shame, shame on the Republican leader,” he said in comments to the Senate. After pushing for tax cuts, pandemic-related spending and previous debt ceiling increases, “what Republicans are doing is nothing less than a dinner-and-dash of historic proportions “.
US Treasury Secretary Janet Yellen has warned that without an increase, the government will run out of cash to fund operations and pay off debts sometime in October.
Failure to raise the debt ceiling “would produce widespread economic catastrophe” and “worsen the damage from the lingering public health emergency,” she said Monday in a Wall Street Journal column.
The debt ceiling has been raised about 80 times since the 1960s, but the problem has often been political football in polarized Washington, with Republicans repeatedly coming to the brink during Democrat Barack’s administration. Obama.
As a result of this conflict in 2011, the United States lost its coveted “AAA” debt rating by Standard and Poor’s. It sent shockwaves through the markets.
But under Trump, Democrats backed Republicans’ efforts to suspend the debt ceiling for two years.
The cap was reinstated on August 1 with $ 28.4 trillion in debt, and the Treasury is already reorganizing public funds to keep paying the bills.
– Extraordinary measures –
Yellen, who had a phone call with McConnell last week, said even waiting until the last minute could lead to a cascade of financial disasters, including rising borrowing rates and 50 million seniors missing their government payments.
The Bookings Institution said the debt ceiling showdown in 2011 increased the treasury’s borrowing costs by $ 1.3 billion, and in the stalemate of 2013 – when Congress waited for the last minute to raise the debt ceiling – investors have ditched Treasury securities, and “these effects are rippling through all the markets.”
The Treasury has already started taking what it calls extraordinary measures to avoid exceeding the borrowing limit, but the measures will become increasingly stringent as the deadline draws near.
These include not investing in savings plans and retirement funds for government employees.