Democrats Accept GOP Plan to Delay Debt Limit Standoff Until December

What’s the story?

• Democrats on Wednesday accepted Senate Minority Leader Mitch McConnell’s (R-KY) offer of a short-term truce in the standoff over the debt limit, which will be increased until December under a deal Congress is expected to act on in the near future.
• McConnell offered Democrats two options: Under the first option, Republicans would agree to fast-track consideration of the Democrats’ debt limit hike through the budget reconciliation process along party-lines to ensure its enactment before the “x-day” of October 18th. The second option, which Democrats accepted, is a short-term debt limit extension based on current spending levels until December.
• According to a report by Politico, McConnell discussed his plan with key Democratic Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ), a pair of moderates who are negotiating to reduce the size of Democrats’ reconciliation bill. 
• Democratic senators took the opportunity to declare victory. Sen. Elizabeth Warren (D-MA) said “McConnell caved!” while leaving a meeting and Sen. Sheldon Whitehouse (D-RI) told MSNBC that “it looks like Mitch just folded.” Sen. Ron Wyden (D-OR) said to reporters:

“Mitch McConnell did not get what he wanted. Now we’re focused on getting what the American people want.”

• McConnell said in a statement that “the unified Democratic government had two and a half months to address the debt limit through reconciliation” but instead “they drifted to the doorstep of yet another self-created Democrat crisis.” The GOP leader added:

“We have already made it clear we would assist in expediting the 304 reconciliation process for stand-alone debt limit legislation. To protect the American people from a near-term Democrat-created crisis, we will also allow Democrats to use normal procedures to pass an emergency debt limit extension at a fixed dollar amount to cover current spending levels into December. This will moot Democrats’ excuses about the time crunch they created and give the unified Democratic government more than enough time to pass standalone debt limit legislation through reconciliation.”

What’s next?

• The Senate is expected to take up the bill to raise the debt limit through December shortly after the Treasury Dept. finishes its calculations as to what the national debt will be in December, which will allow the bill’s writers to include the new debt limit in the legislation. Following Senate passage, the House will likely return within several days to pass the bill and send it to President Joe Biden’s desk.
• Depending on precisely how the debt limit is raised, the new December debt limit may serve as either a hard deadline for default or an early warning tripwire to resume negotiations. That distinction depends on whether Congress includes funding to replace the “extraordinary measures” the Treasury Dept. has been using since the prior debt limit extension ended on August 1st. Extraordinary measures entail the use of cash from several federal accounts to fund the government’s obligations until those accounts are exhausted, at which point there would be a risk of default.
• If the accounts used for extraordinary measures are replenished, there could be two-plus months of lead time to resolve the debt limit ahead of the next deadline; but if they’re not replenished then Congress will be faced with averting a default in December.
• In the meantime, Democrats will be focused on resolving their intra-party divisions over their reconciliation spending bill, given that its size and the extent to which its spending is offset by tax hikes will determine its impact on the deficit and the national debt. 
• Having a firm estimate of the future debt levels after the enactment of Democrats’ spending bill, which could range from being fully offset to raising the debt by $1.75 trillion or more, will be an important reference point in the next debt limit debate because Democrats will still be unlikely to get enough Republican support to suspend the debt limit through a set date, so they will in all likelihood have to specify the new debt limit. 
• Several Democratic senators said Wednesday that they still do not intend to use budget reconciliation to raise the debt limit later this year, but it’s unlikely GOP senators and Sen. Joe Manchin (D-WV) signaled a willingness to use reconciliation so that may be the best available option.
• Democrats could use the budget reconciliation process by amending their budget resolution would allow them to pass a debt limit hike through reconciliation on party-lines with two debt-related “vote-a-ramas” in the Senate. It’s also worth noting that the reconciliation process would allow both the “Build Back Better” bill and a debt limit reconciliation bill to move independently in Congress at the same time without either interfering with the other.

RELATED READING

• Parliamentarian Gives Senators Guidance on Use of Reconciliation to Lift Debt Limit Amid Partisan Standoff (10/4/21)

— Eric Revell

(Photo Credit: McConnell: Gage Skidmore via Flickr / Creative Commons | Schumer: mdfriendofhillary via Flickr / Creative Commons)