Senate Democrats on Wednesday indicated that they will accept Minority Leader Mitch McConnell’s compromise to pass a short-term debt ceiling bill, ensuring the federal government does not default on its financial obligations.
Treasury Secretary Janet Yellen has repeatedly warned that Congress has until Oct. 18 before Treasury exhausts its cash reserves, cautioning that a defaut could have a “catastrophic” impact on the economy and financial markets.
The agreement to act on a short-term hike, which still needs to be turned into legislative language and decisions made on whether it would suspend the debt ceiling until December or provide a specific value it was being raised, follows weeks of the parties remaining at an impasse, with Republicans asserting that they would not vote through an increase as Democrats looked to move forward with a sweeping multi-trillion social spending bill to tackle some of the Biden administration’s top priorities.
Republicans instead said Democrats could use the same reconciliation process they planned to sue for their spending measures to bypass the 60-vote threshold in the upper chamber on hiking the debt limit.
Democrats have been vehement in their stance that it should not be passed using reconciliation, calling for the increase to be approved on a bipartisan basis, arguing it’s necessary to pay for spending made under the previous administration and sets a poor precedent.
Sen. Tammy Baldwin (D-Ill.) referred to the deal as a “temporary victory” during an appearance on CNN, and Sen. Elizabeth Warren (D-Mass.) alleged that “McConnell caved,” telling reporters Democrats will now “spend our time doing childcare, healthcare, and fighting climate change.”
But the seeming agreement was only struck shortly after McConnell called the Democrats’ bluff, offering the option to expedite the reconciliation process or a straight vote on a short term hike.
“Republicans remain the only party with a plan to prevent default. 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,” McConnell said in a statement on Wednesday.
“This will moot Democrats’ excuses about the time crunch they created and give the unified Democratic government more than enough time to pass stand-alone debt limit legislation through reconciliation. Alternatively, if Democrats abandon their efforts to ram through another historically reckless taxing and spending spree that will hurt families and help China, a more traditional bipartisan governing conversation could be possible.”
The move came shortly before the chamber was expected to vote on a standalone House-passed bill to increase the borrowing limit, which was expected to be blocked by GOP lawmakers.
Multiple Democrats emerged from a lengthy caucus meeting on Wednesday afternoon maintaining that they do not see a longer-term solution passing using reconciliation.
“There’s not going to be reconciliation,” Sen. Bernie Sanders (I-Vt.) said.