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Congress provides for short-term debt restructuring in dangerous stalemate

WASHINGTON (AP) – Republican and Democratic leaders have withdrawn from a dangerous stalemate over the lifting of the nation’s credit limit, with Democratic Senators signaling they were receptive to an offer from Senate GOP Leader Mitch McConnell to that would allow an emergency extension to December.

McConnell made the offer late Wednesday, just before Republicans were ready to block debt ceiling suspension laws until December next year, and when President Joe Biden and business leaders heightened concerns that an unprecedented national bankruptcy will disrupt government payments to millions of people and plunge the nation into recession.

The looming deal creates some sort of continuation in December, when Congress again has urgent deadlines to fund the government and raise the debt ceiling before heading home on vacation.

A procedural vote – on the lengthy extension the Republicans wanted to block – was abruptly postponed late Wednesday and the Senate withdrew so lawmakers could consider next steps. The Democrats came out more optimistic from their meeting that a crisis would be averted.

“Basically, I’m glad Mitch McConnell finally saw the light,” said Bernie Sanders, the independent Vermont senator. The Republicans had “finally done the right thing, and at least we now have a few months to come to a permanent solution.”

Senator Chris Murphy, D-Conn. Added that, provided that the final details of the emergency legislation are in place, “we will continue to make it clear over the next three months that we are ready to continue voting to make our payments pay bills and Republicans aren’t. “

Unsurprisingly, McConnell put it quite differently.

“This will challenge Democrats’ excuses about the lack of time they are creating and will give the united democratic government more than enough time to pass stand-alone debt-limiting laws through reconciliation,” he said.

Congress has only days to act before the October 18 deadline, when the Treasury Department warned it would quickly run out of funds to deal with the country’s already accrued debt.

McConnell and the Senate Republicans have insisted that Democrats go alone to raise the debt ceiling and allow the Treasury Department to renew its loans so the country can meet its financial obligations. Additionally, McConnell has insisted that the Democrats use the same cumbersome legislative process called reconciliation that they used to pass a $ 1.9 trillion COVID-19 relief bill in an attempt to get Biden’s 3.5 trillion US dollar measure adopted to strengthen safety net, health and environmental programs.

McConnell said in his offer on Wednesday that Republicans would continue to insist that the Democrats use the reconciliation process for a long-term extension of the debt ceiling. However, he said Republicans are ready to “speed up” this process, and in the meantime, Democrats could use the normal legislative process to pass a short-term extension of the fixed dollar debt ceiling to match current spending levels through December cover.

While he continues to blame the Democrats, his offer will also allow Republicans to avoid the condemnation they would have received from some quarters if a financial crisis strikes.

Early Wednesday, Biden urged business leaders to push for the debt ceiling to be suspended immediately.

At an event in the White House, the President shamed Republican senators for threatening to stop any suspension of the government borrowing agency’s $ 28.4 trillion ceiling. He relied on the credibility of Corporate America – a group traditionally affiliated with the GOP on tax and regulatory issues – to make his point clear when the chiefs of Citi, JP Morgan Chase, and Nasdaq gathered in person and practically cleared the debt pronounced limit must be abolished.

“It’s not right and it’s dangerous,” Biden said of the Republican resistance in the Senate.

His moves came amid talks that Democrats might try to change Senate filibuster rules to bypass Republicans. But Senator Joe Manchin, DW.Va., on Wednesday reiterated his opposition to such a change and likely took it off the table for the Democrats.

Business leaders reiterated Biden’s arguments that the stalemate must be ended as soon as possible, while avoiding partisan tensions. Both portrayed the debt ceiling as an avoidable crisis.

“We can’t wait until the last minute to resolve this issue,” said Jane Fraser, CEO of Bank Citi. “We’re just playing with fire right now, and our country has suffered so much in recent years. The human and economic costs of the pandemic are enormous, and we don’t need a disaster of our own. “

Financial markets haven’t fully registered the drama in Washington, although there are signs they are getting nervous, said Adena Friedman, CEO of the Nasdaq stock exchange.

Stock prices rose after news of McConnell’s offer broke.

Ahead of the White House meeting, the government warned that it could spark an international financial crisis that the United States may not be able to handle if the credit limit is not extended.

“A default would send shock waves through global financial markets and likely cause credit markets to freeze worldwide and stock markets to collapse,” the White House Economic Advisory Council said in a new report. “Employers around the world should probably start laying off workers.”

The recession that could be triggered could be worse than the 2008 financial crisis as many nations are still grappling with the COVID-19 pandemic, the report said. It was first obtained from the New York Times.

To circumvent the stalemate taking place in the Senate, Biden said in spontaneous comments on Tuesday that the Democrats are considering changing the Senate rules.

“It’s a real possibility,” Biden told reporters outside the White House.

But Manchin, who has been resisting pressure from liberal activists for months to change the filibuster so that the Democrats can promote laws on other issues such as the right to vote, has remained unmoved.

“I think I made myself very clear,” Manchin told reporters. “Nothing changes.” He pleaded with Schumer and McConnell to work together to solve the impasse.

The abolition of the filibuster rule would lower the typical threshold of 60 votes for the transition to 50. Then in the 50-50 split Senate, Vice President Kamala Harris could break a tie and allow Democrats to get past Republicans. But to change the rules, all Democratic senators would have to be on board.

Raising the debt ceiling was once a routine affair and has become politically treacherous in the last decade or more, particularly by Republicans to rail against government spending and rising debt burdens.

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AP Business Writer Stan Choe in New York contributed to this report.

Copyright 2021 The Associated Press. All rights reserved.

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