Politics Deal to avert U.S. default, raise debt limit faces test in Senate
Congress hopes to avoid a government shutdown as Friday deadline approaches
Washington and Wall Street were optimistic Monday that Congress can pass a bill to fund the government and avert a partial shutdown before a Friday deadline. Democrats and Republicans appeared to be coalescing around a bill to fund the government through late January or early February, a personal familiar with the discussions told CNBC. A lapse in government funding can lead to furloughs of federal workers and a lapse in some government services.
By Richard Cowan
WASHINGTON (Reuters) - A deal between the top Democrat and Republican in the U.S. Senate to help raise the federal government's $28.9 trillion debt limit will be tested on Thursday when the full chamber votes on whether to approve the measure.
The House of Representatives on Tuesday approved an unusual bill, agreed to by Senate Majority Leader Chuck Schumer and Minority Leader Mitch McConnell, to sidestep the Senate's "filibuster" rule and ultimately raise federal borrowing authority by a simple majority vote.
Congress's goal in December: Avoid shutdown and default
Congress faces a government shutdown by week's end and the expiration of the debt limit on Dec. 15, giving Senate Majority Leader Charles Schumer (D-N.Y.) and Speaker Nancy Pelosi (D-Calif.) two big challenges at the start of a very busy December. Schumer on Monday said avoiding a shutdown would be a top priority in the week ahead. "With so many critical issues, the last thing that the American people need right now is a shutdown. The last thing the American people need right now is a government shutdown, and Democrats are going to work this week to make sure we don't have one," he said.
That deal comes just two months after Congress agreed on a short-term lift to the debt ceiling, to avert an unprecedented default by the federal government on its obligations, which would have catastrophic implications for the world economy.
Republicans have been trying to withhold their votes for more borrowing authority, contending the increase would smooth the way for passage of President Joe Biden's $1.75 trillion "Build Back Better" domestic investment bill, which they oppose.
Democrats note that the legislation is needed to finance debt largely incurred during Donald Trump's administration, when Republicans willingly jacked up Washington's credit card bill by about $7.85 trillion, partly through sweeping tax cuts and spending to fight the COVID-19 pandemic.
Trump urges McConnell to endanger the US economy so Democrats can't pass their spending plan
The former president urged the GOP to use the debt ceiling as a political weapon. That could cause a debt default, endangering the recovering economy.Lawmakers have until December 15 to either raise or suspend the limit on how much the government can borrow. The debt ceiling has loomed over Congress since early October when McConnell offered Democrats a two-month extension to the deadline. With the limit fast approaching, Democrats and the GOP are once again sparring over who will keep the US from defaulting on its debt.
"Soon we'll be able to cross off another major item off our December to-do list," Schumer said on Wednesday, referring to the upcoming debt limit legislation.
Video: Congress advances deal to raise debt limit with majority vote (MSNBC)
But some Senate Republicans, looking to score political points by blaming Democrats for spending, objected to the deal. Republicans contend that "irresponsible," "socialist" spending pushed by Biden is fueling the need for the debt limit increase.
Treasury Secretary Janet Yellen has urged Congress to act by Dec. 15, and the Bipartisan Policy Center think thank warned last week that the government could risk default by late this month if Congress does not act.
Democrats noted that they had voted in the past to authorize debt ceiling hikes to cover Republican measures, such as the Trump tax cuts.
Republicans Reject Mitch McConnell's Plan To Raise the Debt Ceiling
The federal government is expected to default on its debts by January 28 unless an agreement is reached.Senate Majority Leader Chuck Schumer (D-NY) has been in talks with Senate Minority Leader Mitch McConnell (R-KY) in the hopes of reaching an agreement that would allow Democrats to raise the debt limit without Republican votes.
If the Senate passes the measure allowing a simple majority vote to raise the borrowing limit, both chambers will have to vote on another piece of legislation to actually lift the debt limit.
The draft bill still must plug in a dollar amount for the new statutory debt limit, which likely is being calibrated to give the government enough borrowing authority to extend beyond next November's congressional elections.
If Thursday's vote fails, lawmakers will have to scramble to find a backup plan.
"Every single Senate Democrat will have to put their name to the gigantic dollar amount of debt they’re prepared to pile on the American people," McConnell said in a speech on Wednesday.
Democrats insist their domestic spending initiatives would be paid for largely by tax increases on the wealthy and would expand healthcare for the elderly, help poor children and address urgent climate change programs.
If the Senate on Thursday passes the first step in the process with at least 10 Republicans joining the 50 Democrats and independents, it then goes to Biden for signing into law. Schumer then intends to pass the debt-limit implementing bill before next Wednesday.
(Reporting by Richard Cowan, David Morgan and Susan Cornwell; Editing by Scott Malone and Peter Cooney)
House clears bill to raise debt limit .
The House cleared legislation early Wednesday morning to raise the debt limit through next year’s midterm elections, staving off an unprecedented federal default just in time for the deadline set by the Treasury Department. © iStock mashpee wampanoag native american The bill, which lawmakers passed 221-209, with one Republican voting yes, raises the federal debt ceiling by $2.5 trillion to increase the limit to close to $31 trillion. Congressional leaders say the new level will allow the nation to continue to meet its financial obligations through 2022 and into 2023.