WASHINGTON – The Biden administration has recruited envoys to persuade Senate Republican leader Mitch McConnell to raise the national debt limit.
It doesn’t work.
Despite the high-level talks, including a call from Treasury Secretary Janet Yellen, the GOP leader digs himself in and plays political hardball. He tells everyone who will listen that it is up to the Democrats, who barely control Congress, to take the unpopular vote on federal borrowing alone.
McConnell’s stance deepens a political stalemate and risks turmoil in financial markets that could affect the broader economy. His refusal to garner Republican votes leaves the Democrats facing tough decisions as they rush to ensure the nation does not default on its accumulated debt, which now stands at $ 28.4 trillion.
President Joe Biden and Democratic leaders, House Speaker Nancy Pelosi, and Senate Majority Leader Chuck Schumer spoke Thursday afternoon. The White House said after the call that it was a bipartisan responsibility to keep the government running and to ensure the full faith and creditworthiness of the United States.
“Any suggestion by Republicans to shirk their responsibilities is unjustifiable,” the White House said.
While there is little doubt that Democrats will be able to avert a crisis and vote for additional borrowing, the road ahead is uncertain and potentially treacherous.
“We’re working on it, there are a number of different options,” Schumer told reporters at the Capitol earlier this week. “We will do it because it is imperative to do it. And, as I said, Leader McConnell is playing dangerous political games by not stepping on the table. “
The showdown unleashes a fiscal battle reminiscent of those who turned Washington and Wall Street upside down at times over the past decade, but are different. Unlike the brinksmanship of past battles, this one is unique in that there is no deal to be negotiated – McConnell simply won’t participate.
Late Wednesday, McConnell warned Yellen that he would not change his mind. “The Führer repeated to Secretary of State Yellen what he had said publicly since July,” said McConnell spokesman Doug Andres. “You will have to raise the debt ceiling yourself and you have the tools to do it.”
It was similar on Tuesday when Hank Paulson, Treasury Secretary of the Bush administration, paid a visit to McConnell at the Capitol. Other mediators have also come forward and granted anonymity to discuss them, according to a person familiar with the conversations.
Legislators appear to have only a few weeks to work out a plan to approve the federal government’s debt ceiling before the Treasury Department is forced to delay or miss out on payments.
Stocks and bonds have been relatively quiet lately, suggesting investors expect Washington to eventually reach an agreement on the debt ceiling. The S&P 500 remains within 2% of its record two weeks ago, and bond prices are moving more on reports of the economy and inflation. But the ride could get bumpy in the coming weeks.
Considered the safest investments in the world, US Treasuries and Bonds are the foundation of the financial markets. So a default on US bonds would quickly cascade across markets around the world.
Treasury Department spokeswoman Lily Adams said in a statement Thursday, “Secretary Yellen will continue to speak to Republicans and Democrats about the urgent need to address the debt ceiling quickly and across parties to avoid the disastrous economic consequences of default.”
The debt limit limits the amount of money the Treasury Department can borrow to keep the state going and pay off its debts.
Once a routine task in Congress that generated grumbling from lawmakers but not high-level opposition, votes to raise or suspend the debt ceiling are now often controversial.
The 2011 debt ceiling vote became a political weapon used by a new class of Tea Party Republicans eager to stand up to the Obama administration when the debt burden billowed during the Great Recession. Prolonged and heated discussions during this crisis risked national bankruptcy, a first for modern times, but eventually an agreement was negotiated to curb spending.
The Democrats note that they worked three times during President Donald Trump’s presidency with a Republican-controlled Senate and the White House to suspend the credit limit. They insist that Republicans retaliate and take part in a potentially politically unpopular vote that will allow the government not only to pay its bills promptly, but also to take on more debt.
But in McConnell’s view, if Democrats go alone to get Biden’s $ 3.5 trillion budget through Congress, they can use their majority to shoulder the vote on the debt ceiling.
According to Andres, McConnell said to Yellen, “This is a united democratic government that engages in partisan, reckless taxation and spending.”
Analysis of Treasury Department data by the Associated Press shows that nearly 98% of the country’s $ 28.4 trillion debt is prior to Biden’s inauguration in January. This includes about $ 7.8 trillion piled up during Trump’s four-year presidency.
One option would be for the Democrats to enforce the issue either by holding a vote on the debt ceiling alone as part of a bill that funds the government to maintain state finances – and trying to make McConnell and the Republicans blink.
It would take 60 votes in the evenly divided Senate (50-50) to overthrow a Republican filibuster, but it’s not at all clear that McConnell or other GOP Senators would break out of the ranks to join the Democrats.
Senator John Kennedy, R-La., Predicted McConnell would hold out. “I think he’s like that Missouri mule that just sat in the mud and won’t move.”
If Republicans refuse to help, Democrats may have to take the more cumbersome route of amending their $ 3.5 billion budget resolution to include the debt ceiling. This vote would only require 51 votes, with Vice President Kamala Harris casting the casting vote.
Yellen has taken “extraordinary measures” to save cash. But once these measures and cash on hand are completely exhausted, the US will have to rely on incoming revenue to meet its obligations, forcing the Treasury Department to delay or miss payments. Yellen has forecast that this moment will come sometime in October.