Senate Majority Leader Chuck Schumer said on Thursday that an agreement had been reached with Republicans to extend the government’s borrowing power until December, temporarily averting a debt crisis.
“Our hope is to do this today,” Schumer said as he opened the Senate.
In their deal, Republican and Democratic leaders moved away from a perilous standoff over lifting the country’s borrowing cap, with Democratic senators accepting an offer from Senate GOP leader Mitch McConnell.
McConnell made the offer Wednesday shortly before Republicans were ready to block longer-term legislation to suspend the debt limit and as President Joe Biden and business leaders feared a default unprecedented federal disrupting government payments to millions of people and throwing the nation into recession.
Senate leaders worked late into the night to work out the details.
“The Senate is moving forward,” McConnell said Thursday.
The deal paves the way for some sort of sequel in December, when Congress faces pressing deadlines again to fund the government and raise the debt limit before heading home for the holidays.
“Fundamentally, I’m happy that Mitch McConnell has finally seen the light,” said Bernie Sanders, the independent senator from Vermont. The Republicans “have finally done the right thing and at least we now have a few more months to get a permanent solution.”
Senator Chris Murphy, D-Conn., Added that, assuming the final details of the emergency legislation are in order, “for the next three months we will continue to make it clear that we are ready to continue voting. to pay our bills and the Republicans are not.
Unsurprisingly, McConnell portrayed it very differently.
“It will take away the Democrats’ apologies for the time crunch they have created and give the United Democratic government more than enough time to pass stand-alone debt-limiting legislation through reconciliation,” did he declare.
Congress has just days to act before the Oct. 18 deadline, when the Treasury Department warned it would quickly run out of funds to deal with the country’s already accumulated debt.
McConnell and Senate Republicans insisted Democrats should go it alone to raise the debt ceiling and allow the Treasury to renew its borrowing so the country can meet its financial obligations. Further, McConnell insisted Democrats use the same cumbersome legislative process called reconciliation that they used to pass a $ 1.9 trillion COVID-19 relief bill and that they used to try to Pass Biden’s $ 3.5 trillion measure to strengthen safety net, health and environmental programs.
McConnell said in his offer Wednesday that Republicans would still insist Democrats use the reconciliation process for an extension of the long-term debt limit. However, he said Republicans were ready to “help speed up” this process, and that in the meantime, Democrats could use the normal legislative process to pass a short-term debt limit extension with a fixed amount. in dollars to cover current spending levels through December.
While he continued to blame Democrats, his offer will also allow Republicans to avoid the condemnation they would have received from some quarters if a financial crisis were to occur.
Earlier Wednesday, Biden called on top business leaders to push for the immediate suspension of the debt limit, saying the impending deadline creates the risk of a historic default that looks like a “meteor” that could crush the economy and financial markets.
At a White House event, the president shamed Republican senators for threatening to obstruct any suspension of the $ 28.4 trillion cap on the government’s borrowing power. He relied on the credibility of U.S. companies – a group that has traditionally aligned with the GOP on tax and regulatory matters – to make his point as Citi chiefs JP Morgan Chase and Nasdaq stand together. come together in person and virtually to say the debt limit must be lifted.
“It is not fair and it is dangerous,” Biden said of resistance from Republicans in the Senate.
His measures came amid discussions that Democrats may try to change Senate filibuster rules to bypass Republicans. But Senator Joe Manchin, DW.Va., reiterated his opposition to such a change on Wednesday, likely removing him from the Democratic table.
Business leaders echoed Biden’s points about the need to end the impasse as soon as possible, although they avoided partisan tensions by doing so. Everyone has described the debt limit as a preventable crisis.
“We just can’t wait until the last minute to fix this problem,” said Jane Fraser, CEO of Citi Bank. “We’re just playing with fire right now, and our country has suffered so much over the past few years. The human and economic cost of the pandemic has been heartbreaking, and we don’t need a disaster of our own. “
Ahead of the White House meeting, the administration warned that if the borrowing limit was not extended, it could trigger an international financial crisis that the United States may not be able to handle.
“A default would send shockwaves through global financial markets and likely cause credit markets around the world to freeze and stock markets to fall,” the White House Council of Economic Advisers said in a new report. “Employers around the world should probably start laying off workers. “
The recession that could be triggered could be worse than the financial crisis of 2008, as it would come while many countries are still grappling with the COVID-19 pandemic, according to the report.
Once a routine affair, raising the debt ceiling has become politically treacherous over the past decade or more, used by Republicans in particular to denounce government spending and rising debt burdens.