What’s up with the debt ceiling?
The Senate has come up with a unique solution to avoid default.
The Senate is finally doing away with the filibuster — for one vote.
In order to address an impasse over the debt ceiling, Democratic and Republican leaders have agreed to a measure that raises the debt limit with just 51 votes, instead of the 60 that are required if a bill is filibustered. The House already passed the measure on Tuesday night, and the Senate is set to consider it later this week.
Stopping a minority of senators from blocking the bill’s passage is an interesting resolution to a longstanding disagreement the two parties have had regarding how to deal with the debt ceiling (a legal cap to how much the US can borrow). Every year to two years, lawmakers have to either raise or suspend the debt ceiling to make sure that the US is able to cover its spending, a vote Republicans are currently using as a messaging opportunity.
For months, Republicans have tried to push Democrats into raising the debt ceiling on their own in order to paint Democrats as big spenders. Democrats, meanwhile, have argued that this vote should be bipartisan, because both parties are responsible for the accrued debt. Additionally, Democrats have shied away from raising the debt limit unilaterally via budget reconciliation — a process that allows a measure to pass the Senate with a simple majority — because of how arduous and time-consuming that approach would likely be.
The contours of this argument have stayed consistent since October. But a rapidly approaching debt ceiling deadline of December 15 (per estimates from Treasury Secretary Janet Yellen), and fears regarding the fallout from a potential default, have led Senate Majority Leader Chuck Schumer and Minority Leader Mitch McConnell to find a joint solution this time around. Though each leader wanted to force the other party into submission, neither wanted to risk the potentially catastrophic economic effects that going past this deadline could have.
The two leaders have both backed a deal that involves passing a bill allowing Senate Democrats to approve a debt ceiling increase with 51 votes. This move would enable Democrats to address the debt ceiling on their own, while avoiding the use of budget reconciliation to do so. Additionally, it requires Democrats to list a specific number that the debt ceiling will be increased by, a provision Republicans have wanted so they can use this figure to frame the party as a group of reckless spenders. Essentially, it’s a one-time suspension of the filibuster, which requires legislation to have 60 Senate votes to pass if it gets blocked.
Republicans opted to go this circuitous route because they’ve long wanted to claim that they didn’t vote in favor of a debt ceiling increase. However, failing to increase the debt limit was not seen as an option by leadership, due to the negative economic consequences that would have.
This put Republicans in a bind, particularly because certain members could have filibustered a debt ceiling increase again, as they did in October. That would have forced members of the conference to vote in favor of overcoming the blockade, much as some had to do previously. In this case, they are technically voting to approve another bill that allows Democrats to pass the debt ceiling increase unilaterally, and can now say that they did not vote in favor of the increase.
“We want a simple majority without a convoluted, risky, lengthy process and it looks like Republicans will help facilitate that,” Schumer said in a press conference Tuesday.
Schumer and McConnell both announced their support for the proposal on Tuesday. To make it through the Senate, it will need the support of 10 Republicans to overcome any potential attempts to filibuster it, votes which GOP leaders said they’re confident they’ll have.
Once it’s approved by both chambers, Democrats will effectively be able to advance the suspension of the debt ceiling without needing to worry about the 60-vote threshold to overcome a filibuster.
Previously, lawmakers had discussed pairing a debt limit increase with the National Defense Authorization Act (NDAA), an annual bill that lays out plans for military funding, in order to garner GOP support. They’ve since dropped that approach, however, due to bipartisan pushback. After weeks on negotiation on that bill, congressional leaders announced a compromise version on Tuesday; that, too, cleared the House this week and is expected to pass the Senate before the end of this year.
Separating the debt limit and NDAA, and creating a one-time filibuster carve-out is a solution that allows both parties to claim some sort of victory. Republicans are able to say that they made Democrats raise the debt limit and to get them on the record for a specific amount (which could be as high as $2.5 trillion, according to the New York Times). Democrats, meanwhile, are able to avoid using budget reconciliation, giving them more time to focus on passing another piece of legislation they’ve struggled to vote into law: the Build Back Better Act, a massive social and climate spending package. The deal, too, probably ensures that the US won’t default on its debts.Why Congress has been fighting over the debt limit
Raising or suspending the debt limit, something lawmakers have to do to ensure the country has enough money to cover its past spending, has long been politicized.
In the past, both parties have used votes to raise or suspend it as opportunities to accuse the other party of irresponsible spending, with Republicans doing so more frequently in recent years. In reality, additions to the debt — including the most recent ones — have taken place under both Democratic and Republican presidents. And during the Trump administration, debt limit increases received bipartisan backing: In that period, $8 trillion was added to the national debt, and lawmakers voted to suspend the debt limit three times.
This year, however, Republicans have been particularly eager to use the debt limit to send a political message, as midterm elections loom in 2022.
Because Democrats are attempting to pass a $1.85 trillion social and climate spending bill on their own via budget reconciliation, Republican leaders have argued that they should figure out how to raise the debt ceiling on their own, too. Republicans hope to use a Democratic party-line debt limit vote in campaigns to accuse the other party of adding to the debt. They’re implying that Democrats’ spending bills necessitated the debt limit increase, even though the spending covered by the increase has already happened, with much of it taking place under Trump.
The parties have already had this fight this year. The debt default date was originally in October, and Republicans initially refused to help raise the debt limit. They ultimately caved as the default deadline approached. At that time, lawmakers raised it by $480 billion, enough to push the limit date back a few months, and bringing the national debt to roughly $29 trillion.
The latest agreement should end this fight, at least temporarily. It would raise the debt limit by enough to cover expenses until roughly next fall, at which point, this battle will be repeated. Since raising or suspending the debt ceiling is must-pass legislation, it should be a routine issue that Congress checks off, not a controversial one. Because it has to pass, however, it’s often been used as an opportunity for the minority party to extract policy concessions or make a political point (for example, that their opposition spends too freely).The fallout from a default would likely be disastrous
While there has been significant resistance to a filibuster carve-out in the past — be it for voting rights or for immigration — leaders in both parties were willing to make an exception to the rules this time because neither actually want to default on the debt. (To establish a similar exception for other policies in this way, Democrats would also need 10 Republican votes.) Although it is hard to say for sure what would happen, since the US has never actually defaulted, many economists believe a default would lead to massive economic fallout.
“We frequently have drama associated with this decision. But I can assure you the country will never default,” McConnell has said.
Were the US to default, it effectively would be unable to pay its bills, forcing the government to delay payments it typically makes, including Social Security payments and federal employee salaries. And because of how interconnected global financial markets are, and because so many countries and institutions are reliant on payments from the US, it could spur a domestic and global financial crisis. Moody’s Analytics has previously estimated that a default would lead to the loss of 6 million jobs and sharp dips in stock prices.
Those stakes are even higher given the hits the economy has taken due to widespread shutdowns during the pandemic, and because the US has had the highest unemployment rates it’s seen in years. “America must pay its bills on time and in full,” Yellen has previously said. “If we do not, we will eviscerate our current recovery.”
Due to the agreement that’s been reached, Congress is on track to increase the debt ceiling soon, cutting it pretty close with the December 15 deadline Yellen has laid out. If lawmakers keep their plans to extend this ceiling through the midterms, they’ll face another fight over the debt ceiling again next fall.