Debt ceiling impasse has prompted President Joe Biden to lobby lawmakers to raise or suspend the US borrowing limit as the US inches closer to a first-ever default, which would trigger a widespread economic catastrophe.
Biden is likely to urge Democrats and Republicans to put partisanship aside and address the debt ceiling before Oct. 18, when the Treasury Department predicts the US will expend emergency measures to meet bond payments.
Economists can only speculate on the consequences of what would be a historic US default, but several — including Treasury Secretary Janet Yellen and her predecessors — believe they may be “catastrophic.”
Yellen warned House Speaker Nancy Pelosi, D-Calif., that curtailed confidence in Washington’s capacity to repay its debts on time would almost certainly result in an increase in interest rates across the economy, degrade the dollar’s status as the world’s reserve currency, and send shockwaves through financial markets.
Biden asserts that Republican stonewalling on the debt ceiling escalates the risk of a US default.
President Joe Biden cautioned on Monday that the federal government might default on its $28.4 trillion debt limit unless Republicans support Democrats in voting to raise it in the next two weeks.
Senate Republicans, led by Minority Leader Mitch McConnell, have delayed raising the debt ceiling twice in recent weeks, claiming they favor action but will not commit by voting for it. Republicans assert that Democrats may act unilaterally using a parliamentary procedure known as budget reconciliation. Democratic leaders have vehemently opposed that approach.
“Increasing the debt ceiling is about repaying what we currently owe, not about incurring new debt,” Biden stated during a White House news conference.
When pressed whether he could ensure the US will not exceed its debt limit, the president responded: “No, I am incapable. That is a matter for Mitch McConnell.” He stated that he intended to discuss the situation with McConnell.
McConnell regards the threat of a debt ceiling default as a “PREVENTABLE CRISIS.”
For months, McConnell has pressed Democrats to adopt the budget reconciliation procedure to circumvent the Senate’s filibuster rule, which requires 60 of 100 members to vote to pass most legislation. Senate Majority Leader Chuck Schumer, a Democrat, has declined to employ that strategy, and Biden implored Republicans on Monday not to use the filibuster to stop action.
“Simply step aside,” Biden urged Republicans. “If you’re not interested in helping in the country’s recovery, stay out of the way, so you don’t wreck it.”
However, Senator Joe Manchin, a centrist Democrat who has frequently clashed with his colleagues on other critical issues, said Democratic leaders should not rule out using budget reconciliation to raise the debt ceiling.
“Well, they should not rule anything out – we simply cannot let the debt ceiling expire,” Manchin said, according to CNN correspondent Manu Raju, who tweeted the senator’s remarks.
McConnell was insistent, referring to debt ceiling default as a “preventable crisis.” “Democrats must address the debt ceiling,” he asserted on the Senate floor.
In an open letter to Biden, McConnell reaffirmed that Democrats do not need Republican participation to pass a bill raising the debt ceiling. Democrats have had three months’ notice of the Republican stance, McConnell wrote.
Late last month, the United States House of Representatives enacted and forwarded to the Senate a bill suspending the debt ceiling for the Treasury until the end of 2022.
Schumer submitted a procedural vote on Monday, thus ending debate on a plan that would extend the debt limit. The Senate is expected to vote on it later this week, marking Schumer’s third attempt to bring the matter to a vote.
Economists are concerned about the debt ceiling impasse’s unprecedented ramifications.
Treasury Secretary Janet Yellen cautioned legislators last week that the US government’s borrowing capacity would be expended by around Oct. 18.
Failing to act could have far-reaching economic ramifications. Moody’s warned last month that default would result in a nearly 4% decline in economic activity, the loss of almost 6 million jobs, a near-9% unemployment rate, a stock market sell-off stripping out $15 trillion in household wealth, and a spike in interest rates on mortgages, consumer loans, and business debt.
Concerns about the debt ceiling led to Monday’s stock market decline. The major Wall Street indices have plunged.
Dems voted to raise the debt ceiling during Republican President Donald Trump’s administration, despite their opposition to large-scale tax cuts that swelled the debt.
Biden stated that the United States accumulated roughly $8 trillion in additional debt during Trump’s four years in office, accounting for more than a quarter of total outstanding debt.
“With Democrat backing, Republicans in Congress raised the debt three times” during Trump’s presidency, he claimed.
Schumer stated that the Senate would have to remain in session through the weekend and possibly into next week’s scheduled recess if no progress on raising the debt limit is made.