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Politics Congress is about to fight over the debt ceiling again – but it doesn't have to be this way

22:25  26 october  2021
22:25  26 october  2021 Source:   cnbc.com

White House banking on another McConnell retreat over the debt ceiling

  White House banking on another McConnell retreat over the debt ceiling There is confidence inside the West Wing that the next standoff — slated for December — will end in a deal with Republicans like the last one did.But White House officials are still planning for the Kentucky Republican to climb down as yet another deadline approaches in December, after he convinced 10 Republican colleagues to break the logjam last week.

  • With the debt ceiling deadline set for early December, some prominent politicians are drafting ideas to reform or end the borrowing limit ahead of a possible crisis.
  • President Joe Biden's Treasury secretary, Janet Yellen, last month said she would support repealing the debt limit.
  • Ten years ago, Senate Minority Leader Mitch McConnell floated the idea of giving the president the responsibility of lifting the borrowing cap.
U.S. Treasury Secretary Janet Yellen speaks as U.S. President Joe Biden holds a meeting with business leaders and CEOs about the debt limit at the White House in Washington, U.S., October 6, 2021. © Provided by CNBC U.S. Treasury Secretary Janet Yellen speaks as U.S. President Joe Biden holds a meeting with business leaders and CEOs about the debt limit at the White House in Washington, U.S., October 6, 2021.

Raising the debt limit used to be routine in Washington, but over the years it has become more of a partisan battleground, resulting in perennial crises that threaten to undermine global faith in American markets and thrust the U.S. economy into recession.

Janet Yellen says the recent debt ceiling hike will only cover the government's bills through December 3

  Janet Yellen says the recent debt ceiling hike will only cover the government's bills through December 3 The Treasury Secretary said the government will use "extraordinary measures" to stay funded, and it's "imperative" to find a longer-term solution.Yellen wrote a letter to congressional leadership saying that Congress' recent two-month debt ceiling hike presented a "temporary reprieve," but since it is only a short-term solution, the Treasury is employing "extraordinary measures" to allow the government to pay its bills during this time. Last week, the House approved the debt-limit extension - which every Republican member voted against - buying Congress more time to devise a longer-term solution before the US defaults on its debt.

The nation is weeks away from yet another such predicament. After raising the debt limit with days to spare earlier this month, Congress needs to act again on it before some point in December. And another partisan brawl is brewing over giving the Treasury Department the ability to pay for programs lawmakers have already authorized.

Given how predictable and potentially calamitous that gridlock is, it's a wonder Congress hasn't overhauled or removed the borrowing cap altogether.

There are ways to do just that, even though it isn't likely before the next deadline. Important players on both sides of the aisle have proposed solutions. Treasury Secretary Janet Yellen and GOP leader Mitch McConnell have over the years supported dramatic rewrites to the debt limit.

Another debt ceiling fight looms as Biden reveals spending plans

  Another debt ceiling fight looms as Biden reveals spending plans President Joe Biden has dished on his closed-door negotiations with congressional Democrats over his $2 trillion social welfare and climate spending package. © Provided by Washington Examiner But the White House and Capitol Hill's lack of public clarity regarding how Democrats plan to contend with the looming debt limit have observers rattled to frustrated.

Ten years ago, McConnell floated the idea of giving the president the responsibility of lifting the borrowing cap subject to congressional review. Last month, Yellen told the House that she would support a bill erasing the ceiling outright or granting the Treasury secretary power to reset it from time to time.

It might be time for Republicans and Democrats to review the possibilities. Without a measure to lift or suspend the debt limit, Treasury says it only has enough funds to pay the country's bills through early December.

Ditching the debt ceiling

One option is an outright repeal of the debt limit.

Yellen told House lawmakers in September that she supports a couple pieces of legislation that effectively cancel the borrowing limit in its current form. She noted Congress decides on taxes and spending, but should also provide better way to pay those obligations.

McConnell: GOP will block debt limit hike if Democrats pursue spending plans

  McConnell: GOP will block debt limit hike if Democrats pursue spending plans "If they don’t need or want our input, they won’t get our help," GOP leader says.Democrats are aiming to use the budget reconciliation process to advance the sweeping spending bill without GOP votes. McConnell said if Democrats "ram" the bill through the Senate, Republicans won't provide any votes to raise the debt limit.

"If to finance those spending and tax decisions, it's necessary to issue additional debt, I believe it's very disruptive to put the president and myself, the Treasury secretary, in a situation where we might be unable to pay the bills that result from those past decisions," she said on Sept. 30.

There are at least two similar bills in the current Congress that might appeal to Yellen.

The first, introduced in May by Democratic Sens. Chris Van Hollen, Brian Schatz and Michael Bennet, would repeal the ceiling.

"Paying our debts should be an automatic act, not a politicized weapon used for leverage," Schatz said in a press release published in May. "It's clear that the debt ceiling is not about fiscal responsibility, but about unnecessary brinksmanship."

More recently, House Budget Committee Vice-Chair Rep. Brendan Boyle and Budget Committee Chair Rep. John Yarmuth introduced the Debt Ceiling Reform Act, legislation that would relieve Congress of its authority over the borrowing cap and transfer that power to the Treasury Department.

The two House Democrats introduced their two-sentence bill in late September.

As US debt limit looms again, calls intensify for reform

  As US debt limit looms again, calls intensify for reform The US government is once again nearing the limit on how much debt it can take on, a familiar deadline that will force the country's political elite into high-stakes negotiations over averting a default. The world's largest economy has never failed to meet a debt payment before, and though standoffs like these have become familiar in Washington, Democrats and Republicans are expected to eventually reach a compromise before the limit may be reached in December.

Asked to expand on Yellen's thoughts, both the Treasury Department and White House declined to comment.

The McConnell pitch

An alternative suggestion came in 2011, when Senate Minority Leader Mitch McConnell, R-Ky., offered a plan to avoid a then-looming sovereign default.

With Congress closer than ever to the nation's drop-dead date and S&P's move to downgrade the U.S. credit rating, McConnell floated a plan that would have guaranteed the president's requests for new government borrowing powers.

"The president, as CEO of the nation, would inform Congress of the new debt ceiling level, and Congress could block it with a joint resolution," explained Tom Block, a policy analyst at Fundstrat Global Advisors.

The plan McConnell pitched 10 years ago has clever and pragmatic elements.

Since the bulk of federal spending is linked to presidents' campaign promises, McConnell's strategy would force the White House to bear the responsibility for lifting the debt cap. If Congress finds the plan too extreme, lawmakers could then pass a bill to prevent the White House from adjusting the ceiling as proposed.

The bill would then travel to the Oval Office where the president would presumably veto a bill that challenged the administration's suggestion. That disapproval would allow the the debt ceiling to increase as planned or lead Congress to attempt an override of the veto with a two-thirds majority.

U.S. could hit debt ceiling mid-December

  U.S. could hit debt ceiling mid-December Less than a month after lawmakers passed a small increase to the debt limit, the country again faces a deadline.Earlier this month, Congress moved to raise the debt limit by $480 billion, which would allow the government to keep paying the bills through early December. But in a letter to congressional leaders last week, Treasury Secretary Janet Yellen said the department will need to keep using so-called extraordinary measures, such as not investing in some retirement funds and suspending the sale of some securities. She said it was "imperative" for Congress to act.

It's rare in the current partisan era for to find enough politicians to secure a majority, much less a two-thirds supermajority. That means that the McConnell plan would likely default to debt-ceiling increases unless the president's proposal was so absurd that it unified 67% of federal lawmakers.

A representative for McConnell declined to comment for this story.

The idea has legs. Sen. Joe Manchin, the powerful conservative West Virginia Democrat, said Tuesday that he would support such reform to the debt ceiling procedure.

It should be set up so "the president has the right to make that decision, we have the right to override it if we think he went too far," he said.

While the minority leader may have been open to such a plan in 2011, there's little evidence to suggest he supports it now. Further, the bill that solved that year's debt-ceiling crisis likely appealed to McConnell given language that reined in government spending and deficits.

Sen. Lamar Alexander, R-Tenn., Sen. John Barrasso, R-Wyo., Sen. Orrin G. Hatch, R-Utah, and Senate Minority Leader Mitch McConnell, R-Ky., during a news conference after the Senate Republican policy luncheon in the U.S. Capitol. © Provided by CNBC Sen. Lamar Alexander, R-Tenn., Sen. John Barrasso, R-Wyo., Sen. Orrin G. Hatch, R-Utah, and Senate Minority Leader Mitch McConnell, R-Ky., during a news conference after the Senate Republican policy luncheon in the U.S. Capitol.

Manchin's remarks, notably, came as he pushes to shrink President Joe Biden's social and climate spending plan. Increases to the debt ceiling do not authorize new government spending. Instead, it allows the Treasury Department to continue to pay off bills Congress has accumulated through legislation it has already passed.

Yellen says reconciliation a 'viable' way to tackle debt limit

  Yellen says reconciliation a 'viable' way to tackle debt limit Treasury Secretary Janet Yellen said using a budget procedure known as reconciliation is a "viable" solution to raising the debt ceiling for Democrats if Republicans won't take action to prevent the nation from defaulting on its national debt.In a recent interview with The Washington Post, Yellen reiterated that tackling the debt ceiling should "absolutely" be done on a bipartisan basis, as it has in the past. But if a current standoff between Republicans and Democrats over the debt ceiling doesn't let up, Yellen said Democrats may have to handle the problem themselves.

Still, that hasn't stopped Republicans and Democrats from using the threat of the nation's first-ever default and economic calamity to score political points.

Most economists, including Yellen and former living Treasury secretaries, say that a default would spark a recession and jeopardize the full faith and credit of the United States. U.S. debt would be less attractive to bondholders around the world, causing a spike in interest rates, and undermine the stability of the U.S. dollar as the globe's reserve currency.

The next showdown

While leaders of both parties have from time to time pushed for material changes to the debt ceiling, it's uncertain whether lawmakers will be able to drum up enough support anytime soon.

Without major restructuring, lawmakers are left with two options to act before the looming December deadline.

The first requires bipartisanship: Democrats can try to persuade 10 Republicans to vote with them to block a GOP filibuster with 60 votes. This way would empower the GOP to make demands, which would likely include a severe reduction to or outright abandonment of Democrats' $2 trillion reconciliation bill.

Nancy Pelosi, Chuck Schumer are posing for a picture: Speaker of the House Nancy Pelosi (D-CA) and U.S. Senate Majority Leader Chuck Schumer attend a news conference with mothers helped by Child Tax Credit payments at the U.S. Capitol in Washington, U.S., July 20, 2021. © Provided by CNBC Speaker of the House Nancy Pelosi (D-CA) and U.S. Senate Majority Leader Chuck Schumer attend a news conference with mothers helped by Child Tax Credit payments at the U.S. Capitol in Washington, U.S., July 20, 2021.

Since Democrats campaigned on promises to overhaul the nation's physical infrastructure and enact legislation on progressive priorities like climate change and poverty, that option isn't realistic.

McConnell, meanwhile, has promised that all Republicans will oppose a debt-ceiling compromise since Democrats have opted to force much of their agenda through the Senate via reconciliation.

Democrats will then be forced to use reconciliation, a special process that allows bills to clear the Senate with a simple majority, to raise the debt ceiling in December.

While it's their only realistic option, Democrats may not like the idea of passing a debt-ceiling increase via reconciliation since it would force the party to vote for a dollar-figure amount.

While Democrats have argued thus far that the debt limit is a bipartisan responsibility, House Speaker Nancy Pelosi signaled on Sunday that she's open to Democrats acting alone through reconciliation.

"That's one path. But we're still hoping to have bipartisanship," she said on CNN's "State of the Union."

CNBC's Nate Rattner contributed to this report.

Treasury Secretary Yellen breaks with Biden and says Democrats should consider lifting debt limit without GOP help: 'I don't want to play chicken' .
Mitch McConnell is digging in against helping Democrats lift the debt limit, and Yellen says she doesn't want to risk a devastating default."Should it be done on a bipartisan basis? Absolutely," Yellen told The Washington Post's Jeff Stein. "Now, if they're not going to cooperate, I don't want to play chicken and end up not raising the debt ceiling. I think that's the worst possible outcome.

usr: 1
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