Democrats, in turn, have balked at a Republican demand to use a fast-track process known as budget reconciliation to raise the debt limit without Republican votes. Democrats used the process to pass the coronavirus relief package and they are using it again for the climate, tax and spending plan, but they have argued that Republicans should help keep the government from defaulting.
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.
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.
Aides in both parties, while cautioning that a solution has not been agreed to, noted that party leaders had so far refrained from publicly trading blame over the issue.
As a way of navigating around the impasse, some officials have discussed the possibility of handing the authority of raising the debt limit to the administration, while granting Congress the ability to disapprove the decision with just a simple majority.
Some lawmakers, however, may be unwilling to hand that power to the White House or lose a cudgel often used by the minority party to exert pressure, particularly while 60 votes are needed to end a filibuster in the Senate.
Other officials have floated attaching legislation raising the debt limit to the sprawling annual defense policy bill, which is the last major must-pass piece of legislation that lawmakers plan to approve in December.
But it is unclear whether such a plan would be successful: Attaching a debt ceiling increase could jeopardize the Republican votes needed to counter the bloc of liberal Democrats who typically oppose the defense bill in protest of military spending. Representative Kevin McCarthy, Republican of California and the minority leader, warned on Friday that such a maneuver could tank passage of the entire package.
The Bipartisan Policy Center said that there was additional uncertainty surrounding the debt limit this year because of the pandemic and the various economic relief programs that are still ongoing.
Article source: https://www.nytimes.com/2021/12/03/business/economy/debt-ceiling-xdate.html
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