Senate leaders clinched a deal on Thursday to avoid an economic nightmare in less than two weeks, pushing their debt ceiling stalemate into December and creating a fiscal pileup around the holidays.
Senate Majority Leader Chuck Schumer announced the agreement on Thursday morning after the Senate adjourned just after midnight. The plan, which the upper chamber could pass later Thursday, would raise the nation’s credit limit by $480 billion through Dec. 3, when government funding is also set to expire.
The language doesn’t restrict Treasury’s use of extraordinary measures, meaning the Dec. 3 debt limit deadline is just an estimate. The actual debt ceiling, when the Treasury Department would hit a crisis point, could come later than that.
With an unparalleled default on the nation’s debt temporarily off the table, both parties are billing the debt limit patch as a win. But the two sides are still sticking to arguments that sparked the fiscal cage match in the first place. The short-term fix merely punts a standoff that has already dragged on for months, and could serve to make the fight even more of a mess by setting up a year-end fiscal crunch that pairs the threat of default with a possible government shutdown.
Democrats may need help from at least 10 GOP senators to pass the deal on Thursday. Some Republicans, concerned about letting Democrats off easy, don’t want to allow Democrats to pass the measure with a simple 51-vote majority on the floor.
Sen. John Cornyn (R-Texas) acknowledged there were Republican objections, but he predicted any holdups would be resolved after the GOP conference meets for lunch Thursday afternoon.
“We’ll have a robust conversation about the wisdom of that but any single senator can force a delay and force us to go through the motions, but it won’t change the outcome,” Cornyn said. “By objecting to an expedited procedure, it does force Republicans to come up with the 10 votes to get to the 60, which strikes me as not a great idea.”
Even some GOP hardliners appear open to allowing for a fast-track process. Sen. Josh Hawley (R-Mo.) said that he wouldn’t object to a time agreement that ensures a quick vote on the measure, but he reiterated that he will “vote no on raising the debt ceiling.”
Votes on the agreement would mean scrapping a previously scheduled procedural vote on House-passed legislation that would suspend the nation’s borrowing authority through the end of next year. That vote was expected to fail amid almost unilateral GOP opposition.
Senate Minority Leader Mitch McConnell, who extended the extension offer on Wednesday afternoon, said it gives Democrats time to go-it-alone and eventually hike the nation’s credit limit using reconciliation, or the same special budget maneuver that Democrats are using to pass their party-line spending plan. In that case, Republicans could use the higher debt figure in political ads against the majority party as Democrats defend razor-thin margins in the 2022 midterms.
“The pathway our Democratic colleagues have accepted will spare the American people any near-term crisis while definitely resolving the majority’s excuse that they lacked time to address the debt limit“ through reconciliation, McConnell said on the floor Thursday.
But Democrats emerged from a caucus meeting on Wednesday afternoon insisting that McConnell had caved by extending the provisional patch and that they won’t use reconciliation to lift the debt ceiling. Republicans must agree to a longer-term bipartisan solution, as the GOP has done in prior debt limit fights, Democrats say.
Some Democrats had entertained making an exception to the Senate’s filibuster rules for debt ceiling legislation, but the idea was quickly rejected on Wednesday by Sen. Joe Manchin (D-W.Va.), one of the party’s key centrists.
When asked how the new debt limit deal prevents Congress from having the same fiscal fight in late-November, Sen. Chris Murphy (D-Conn.) said it doesn’t.
“This is the only offer that we got from Sen. McConnell that didn’t involve the byzantine process of reconciliation,” he said on Wednesday.
“The bottom line is, Republicans know they’re going to get blamed for this,” Murphy said. “They’ve come to the table with a proposal that at least gets us to December. And hopefully by December they’ll realize that doing this three months at a time isn’t in their interest.”
But Senate Minority Whip John Thune (R-S.D.) said Republicans are “still pretty intent“ on forcing Democrats to use reconciliation. Some conservatives such as Sen. Lindsey Graham (R-S.C.), the top Republican on the Budget Committee, are worried that Democrats will continue to blow off using the special budget process, concerned the deal could eventually give them a pass on GOP demands.
“We need to know how much they’re going to raise the debt limit by,” Thune said on Wednesday. “I think it would be good to know how much they intend to borrow and spend.”
The debt ceiling, however, only covers spending that has already been authorized by the federal government. The Biden administration has warned that the Treasury Department could run out of money as soon as Oct. 18, which could send financial markets into a tailspin, raise interest rates and jeopardize critical safety net payments to millions of Americans.
If Congress can’t come to an agreement by early December, Treasury could once again deploy a variety of measures to ensure the government keeps paying the bills on time, as the agency did over the summer when a cap on the nation’s borrowing limit was reinstated. But those measures will eventually run out, and the exact timing for when they do can fluctuate around federal cash flow.
Treasury Secretary Janet Yellen has warned Congress could cause “irreparable damage to the U.S. economy and global financial markets“ by waiting until the last minute to raise or suspend the debt ceiling.