Congress Raises Debt Ceiling Through December 3
By Aharon Shelef
October 2021
Four days away from economic catastrophe, President Joe Biden signed a bill raising the debt ceiling through December 3. For weeks, Democrats and Republicans had remained locked in a standoff over how to raise the debt ceiling by October 18 until Senate Minority Leader Mitch McConnell (R-KY) offered Democrats a short-term raise, avoiding immediate disaster but guaranteeing the same standoff in November and early December.
The debt ceiling is a cap on the amount of debt that Congress permits the government to accumulate. If the government breaches the debt ceiling, it can no longer borrow money to pay its bills, causing the United States to default and triggering a financial crisis. If the country were to default, which has never happened before in history, interest rates would likely rise, stocks would likely plummet, and the government would not be able to make payments, including Social Security benefits, food assistance, and wages for federal employees. Treasury Secretary Janet Yellen has warned that failure to raise the debt ceiling in time could result in “irreparable damage to the US economy and global financial markets.”
Despite all of this, raising the debt ceiling has recently proven politically polarizing with Republicans refusing to support a raise and Democrats refusing to raise the ceiling on their own. Republicans argue that since Democrats control all the levers of government and are planning to unilaterally pass the multi-trillion dollar Build Back Better Act, Democrats should single-handedly raise the debt ceiling via the complicated process known as “budget reconciliation” which allows a bill with only budgetary provisions to pass the Senate with a simple majority vote (as opposed to a filibustered bill, which requires 60 votes for passage). Republicans also offered to support a debt ceiling raise if Democrats dropped their plan for the Build Back Better Act, an idea that Democrats immediately rejected.
Democrats claim that using reconciliation sets a dangerous precedent for the future and that reconciliation requires too much time than could be allocated before the October 18 deadline. They argue that Republicans have a duty to agree to a raise, pointing to the fact that the Trump Administration acquired most of the debt since the last debt ceiling raise and that they helped Republicans raise the debt ceiling three times during Trump’s term. A common perception is that raising the debt ceiling authorizes new spending, while in practice it allows the government to continue functioning, given all the debt it has already accumulated.
Democrats first attempted to raise the debt ceiling by attaching it to a stopgap funding bill that included government funding through December 3, money to help resettle Afghan refugees, and relief for Hurricane Ida victims. When Senate Majority Leader Chuck Schumer (D-NY) brought the bill to a vote, Republicans filibustered. With the Senate split 50-50 (and Vice President Kamala Harris as the tie-breaking vote), Democrats lacked the votes to pass the bill without Republican support, resulting in its failure. On September 30, Democrats dropped the debt ceiling from the stopgap funding, allowing the bill to pass and averting a government shutdown but leaving no clear path forward for the debt ceiling.
The gridlock saw no breakthroughs until October 5, when President Biden called creating a filibuster carve-out for the debt ceiling “a real possibility.” It only takes a simple majority of senators to change the Senate’s rules so Democrats could theoretically create a filibuster exception for the debt ceiling or even get rid of the filibuster altogether. However, not all Democratic senators support a change in the rules, which is why they have not done it already to pass Biden’s other major legislative priorities such as voting rights, policing, immigration, and gun control. Some Democrats also proposed repealing the debt ceiling entirely, eliminating the threat of default in the future.
The next day, McConnell offered Republican support for a short-term debt ceiling raise if Democrats agree to use reconciliation for a long-term resolution, arguing that this would give Democrats plenty of time to work through the complicated process. It is unknown what prompted this offer but many people attributed it to the prediction that McConnell would do anything to protect the filibuster, the only tool he has to block Biden’s priorities. Democrats took the offer without agreeing to use reconciliation, striking a deal with Republicans to raise the debt ceiling by $480 billion that pushed the estimated default date to December 3. The deal passed both chambers of Congress and Biden signed it on October 14. With the standoff simply pushed later in the calendar rather than resolved, America is sure to hear much more about the debt ceiling later this month.
October 2021
Four days away from economic catastrophe, President Joe Biden signed a bill raising the debt ceiling through December 3. For weeks, Democrats and Republicans had remained locked in a standoff over how to raise the debt ceiling by October 18 until Senate Minority Leader Mitch McConnell (R-KY) offered Democrats a short-term raise, avoiding immediate disaster but guaranteeing the same standoff in November and early December.
The debt ceiling is a cap on the amount of debt that Congress permits the government to accumulate. If the government breaches the debt ceiling, it can no longer borrow money to pay its bills, causing the United States to default and triggering a financial crisis. If the country were to default, which has never happened before in history, interest rates would likely rise, stocks would likely plummet, and the government would not be able to make payments, including Social Security benefits, food assistance, and wages for federal employees. Treasury Secretary Janet Yellen has warned that failure to raise the debt ceiling in time could result in “irreparable damage to the US economy and global financial markets.”
Despite all of this, raising the debt ceiling has recently proven politically polarizing with Republicans refusing to support a raise and Democrats refusing to raise the ceiling on their own. Republicans argue that since Democrats control all the levers of government and are planning to unilaterally pass the multi-trillion dollar Build Back Better Act, Democrats should single-handedly raise the debt ceiling via the complicated process known as “budget reconciliation” which allows a bill with only budgetary provisions to pass the Senate with a simple majority vote (as opposed to a filibustered bill, which requires 60 votes for passage). Republicans also offered to support a debt ceiling raise if Democrats dropped their plan for the Build Back Better Act, an idea that Democrats immediately rejected.
Democrats claim that using reconciliation sets a dangerous precedent for the future and that reconciliation requires too much time than could be allocated before the October 18 deadline. They argue that Republicans have a duty to agree to a raise, pointing to the fact that the Trump Administration acquired most of the debt since the last debt ceiling raise and that they helped Republicans raise the debt ceiling three times during Trump’s term. A common perception is that raising the debt ceiling authorizes new spending, while in practice it allows the government to continue functioning, given all the debt it has already accumulated.
Democrats first attempted to raise the debt ceiling by attaching it to a stopgap funding bill that included government funding through December 3, money to help resettle Afghan refugees, and relief for Hurricane Ida victims. When Senate Majority Leader Chuck Schumer (D-NY) brought the bill to a vote, Republicans filibustered. With the Senate split 50-50 (and Vice President Kamala Harris as the tie-breaking vote), Democrats lacked the votes to pass the bill without Republican support, resulting in its failure. On September 30, Democrats dropped the debt ceiling from the stopgap funding, allowing the bill to pass and averting a government shutdown but leaving no clear path forward for the debt ceiling.
The gridlock saw no breakthroughs until October 5, when President Biden called creating a filibuster carve-out for the debt ceiling “a real possibility.” It only takes a simple majority of senators to change the Senate’s rules so Democrats could theoretically create a filibuster exception for the debt ceiling or even get rid of the filibuster altogether. However, not all Democratic senators support a change in the rules, which is why they have not done it already to pass Biden’s other major legislative priorities such as voting rights, policing, immigration, and gun control. Some Democrats also proposed repealing the debt ceiling entirely, eliminating the threat of default in the future.
The next day, McConnell offered Republican support for a short-term debt ceiling raise if Democrats agree to use reconciliation for a long-term resolution, arguing that this would give Democrats plenty of time to work through the complicated process. It is unknown what prompted this offer but many people attributed it to the prediction that McConnell would do anything to protect the filibuster, the only tool he has to block Biden’s priorities. Democrats took the offer without agreeing to use reconciliation, striking a deal with Republicans to raise the debt ceiling by $480 billion that pushed the estimated default date to December 3. The deal passed both chambers of Congress and Biden signed it on October 14. With the standoff simply pushed later in the calendar rather than resolved, America is sure to hear much more about the debt ceiling later this month.