The financial sector had been projecting a grim two weeks ahead. A report released by Goldman Sachs said that there was little reason to believe Congress would meet the Oct. 18 deadline, but that “the public and financial market response would likely force a quick political resolution.”
Senate Democrats are still weighing their options for a path forward. Jen Psaki, the White House press secretary, told reporters on Wednesday that the White House did not want to keep prolonging things with an extension. “We don’t need to go through a cumbersome process that every day brings additional risks,” Ms. Psaki said.
Asked why the White House does not support a short-term debt ceiling increase that could, at least temporarily, calm financial markets, Ms. Psaki replied, “Why not just get it done now?” She said Mr. Biden and Mr. McConnell had not yet spoken about the debt limit.
The budget process of reconciliation would most likely involve two marathons of politically charged votes that Mr. Biden has predicted would be “fraught with all kinds of potential danger for miscalculation.” Democrats say there is no guarantee that Republicans wouldn’t drag those votes out to inflict procedural and political discomfort.
Understand the U.S. Debt Ceiling
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What is the debt ceiling? The debt ceiling, also called the debt limit, is a cap on the total amount of money that the federal government is authorized to borrow via U.S. Treasury bills and savings bonds to fulfill its financial obligations. Because the U.S. runs budget deficits, it must borrow huge sums of money to pay its bills.
Why does the U.S. limit its borrowing? According to the Constitution, Congress must authorize borrowing. The debt limit was instituted in the early 20th century so the Treasury did not need to ask for permission each time it needed to issue bonds to pay bills.
What about raising the debt limit via reconciliation? Reconciliation, a fast-track process that shields fiscal legislation from a filibuster, is one way Democrats could steer around Republican opposition and act unilaterally. But Democratic leaders have publicly resisted that option, which would be complex and time-consuming.
Why is raising the debt limit so difficult? For many years, raising the debt ceiling was routine. But as the political environment has become more polarized, Congress has been playing an increasingly dangerous political game over the debt ceiling.
Do other countries do it this way? Denmark also has a debt limit, but it is set so high that raising it is generally not an issue. Most other countries do not. In Poland, public debt cannot exceed 60 percent of gross domestic product.
What are the alternatives to the debt ceiling? The lack of a replacement is one of the main reasons the debt ceiling has persisted. Ms. Yellen said that she would support legislation to abolish the debt limit, which she described as “destructive.” It would take an act of Congress to do away with the debt limit.
Another option would be to change Senate rules to weaken the ability to filibuster, a proposal that has become increasingly popular in recent years as partisan gridlock has worsened.
Lawmakers have carved out other exceptions to the filibuster. In 2017, Senate Republicans created an exception to clear a path for Neil M. Gorsuch, President Donald J. Trump’s first Supreme Court nominee, to take the bench. In 2013, Senate Democrats did so to overcome Republican opposition to President Barack Obama’s nominees for cabinet posts and judgeships.
On Tuesday evening, Mr. Biden called that route “a real possibility.” On Wednesday, he said he wanted to explain “in plain English” what was at stake should Republicans remain unmoved.
Article source: https://www.nytimes.com/2021/10/06/business/debt-ceiling-default-banks-mcconnell.html
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