WASHINGTON – The Biden administration has enlisted one envoy after another to convince Republican Senate Leader Mitch McConnell to help raise the federal debt limit.
It does not work.
Despite high-level conversations, including an appeal from Treasury Secretary Janet Yellen, the GOP leader is digging and playing tough politics. He tells all who listen to him that it is up to the Democrats, who have tight control over Congress, to take the unpopular vote on federal loans themselves.
McConnell’s position deepens a political stalemate and risks financial market turmoil that could spill over into the wider economy. His refusal to rally Republican votes leaves Democrats with tough choices as they rush to ensure the nation does not default on any of its accumulated debts, which now stand at $ 28.4 trillion. .
“Any suggestion by Republicans that they will shirk their responsibility is untenable,” the White House said.
While there is no doubt that Democrats will be able to avoid a crisis and vote to authorize additional borrowing, the way forward is uncertain and potentially dangerous.
“We’re working, there are a number of different options,” Schumer told reporters earlier this week on Capitol Hill. “We will do it because it is imperative to do it. And Chief McConnell, as I said, is playing dangerous political games by not intervening. “
The showdown sparks a tax battle reminiscent of, but different from, those that have sometimes put Washington and Wall Street on their nerves over the past decade. Unlike the warlike spirit of past battles, this one is unique in that there is no deal to negotiate – McConnell simply won’t participate.
Late Wednesday, McConnell warned Yellen he would not change his mind. “The leader has repeated to Secretary Yellen what he has said publicly since July,” McConnell spokesman Doug Andres said. “They will have to raise the debt ceiling themselves and they have the tools to do it.”
It was a similar situation on Tuesday when Hank Paulson, who was Secretary of the Treasury in the Bush administration, visited McConnell on Capitol Hill.
Lawmakers appear to have only a few weeks to work out a plan to approve the federal government’s debt limit before the U.S. Treasury is forced to delay or miss payments.
Stocks and bonds have been relatively calm recently, indicating that investors expect Washington to finally reach a debt ceiling deal. The S&P 500 remains below 2% of its high from two weeks ago, and bond market prices move further based on reports on the economy and inflation. But the ride could become more bumpy in the coming weeks.
Because they are considered the safest investments in the world, US Treasuries and bonds form the backbone of financial markets. Thus, a default on US debt would quickly spill over into markets around the world.
Treasury spokeswoman Lily Adams said in a statement Thursday: “Secretary Yellen will continue to speak to Republicans and Democrats about the critical need to quickly tackle the debt ceiling in a bipartisan fashion, in order to avoid the catastrophic economic consequences of a default ”.
The debt limit caps the amount of money the treasury can borrow to run government and pay its debts.
Once a routine task in Congress that drew growls from lawmakers but not opposition to high stakes, votes to raise or suspend the debt ceiling are now often controversial.
The debt ceiling vote became a political weapon in 2011, wielded by a new class of Tea Party Republicans eager to confront the Obama administration as the debt burden increased during the Great Recession. Prolonged and heated discussions during this crisis risked a federal default, a first in the modern era, but an agreement was eventually negotiated to begin cutting spending levels.
Democrats note that three times during President Donald Trump’s presidency, they worked with a Republican-controlled Senate and White House to suspend the borrowing limit. They insist that Republicans reciprocate and share what may be a politically unpopular vote that allows the government not only to quickly pay its bills, but also to take on more debt.
But in McConnell’s view, if Democrats want to go it alone to push Biden’s $ 3.5 trillion budget plan through Congress, they can use their majority to shoulder the debt limit vote.
According to Andres, McConnell told Yellen: “This is a unified Democratic government, engaged in partisan and reckless tax and spending madness.”
An Associated Press analysis of US Treasury data shows that nearly 98% of the $ 28.4 trillion national debt predates Biden’s inauguration in January. This includes roughly $ 7.8 trillion piled up during Trump’s four-year presidency.
One option would be for Democrats to force the issue by holding a debt ceiling vote either as part of a must-see bill to keep government funded after October 1 – and to try to make the eyes blink McConnell and the Republicans.
It would take 60 votes in the equally divided Senate, 50-50, to overcome a Republican obstruction, but it’s not at all clear that McConnell or any other GOP senator would break ranks to join the Democrats.
Senator John Kennedy, R-La., Predicted McConnell will hold on. “I think he’s like that Missouri mule that just sat down in the mud and isn’t going to move.”
If the Republicans refuse to help, the Democrats may have to take the heavier route of changing their $ 3.5 billion budget resolution to include the debt ceiling. This vote would only need 51 votes for approval, with Vice President Kamala Harris able to cast the deciding vote.
Yellen used “extraordinary measures” to save money. But once these measures and liquidity are completely depleted, the United States will have to rely on incoming receipts to pay its obligations, forcing the Treasury to delay or miss payments. Yellen has predicted that this moment will come in October.
Associated Press editors Stan Choe, Brian Slodysko, and Martin Crutsinger contributed to this report.