Senate Nears Agreement to Lift Debt Ceiling Until December

Praying for Republicans to fold was an even riskier play for Democrats, given the stakes. If, for the first time, the U.S. government could not meet its obligations to international lenders, its role as the world economy’s safe-harbor investment would be called into question. Interest rates would most likely rise sharply, and global financial institutions would begin searching for new vehicles to store money, where it would not be subject to the whims of partisan politics.

“We’re not asking them to blink; we’re asking them to be the slightest bit reasonable,” Senator Angus King, a centrist independent from Maine, said of Republican leaders. “The political gain of this strikes me as low. The loss to the country strikes me as extraordinarily high.”

Understand the U.S. Debt CeilingCard 1 of 9

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.

When will the debt limit be breached? Technically, the U.S. hit its debt limit at the end of July. Treasury Secretary Janet Yellen has been using “extraordinary measures” since then to delay a default. Ms. Yellen warned of “catastrophic” consequences if the debt limit isn’t raised before a default, which the Treasury estimates would happen on Oct. 18.

What are those consequences? Ms. Yellen told Congress that inaction could lead to a self-inflicted economic recession and a financial crisis. She also said that failing to raise the debt ceiling could affect programs that help millions of Americans, including delays to Social Security payments.

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.

Why hasn’t Congress acted yet? Led by Senator Mitch McConnell, Republicans have said Democrats must supply all the votes to raise the debt ceiling, but have filibustered their attempts to do so. Senate Democrats increasingly see the G.O.P. blockade as clear justification for changing the chamber’s filibuster rule.

What about raising the debt limit via reconciliation? Reconciliation, a fast-track process that shields fiscal legislation from a filibuster, is one way Democrats could steer around Republican opposition and act unilaterally. But Democratic leaders have publicly resisted that option, which would be complex and time-consuming.

Why is raising the debt limit so difficult? For many years, raising the debt ceiling was routine. But as the political environment has become more polarized, Congress has been playing an increasingly dangerous political game over the debt ceiling.

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.

Republican obstruction on the borrowing limit forced Democrats last week to strip a debt-ceiling increase from a must-pass spending bill to avert a government shutdown. And Mr. McConnell refused to allow Democrats to unilaterally move to a vote.

“Democratic leaders haven’t wanted solutions,” Mr. McConnell said on the Senate floor on Wednesday. “They’ve wanted to turn their failure into everybody else’s crisis, playing risky games with our economy, using manufactured drama to bully their own members, indulging petty politics instead of governing.”

Top Democrats have since dropped their insistence that Republicans join them in bipartisan support for raising the statutory cap on the government’s ability to borrow to meet its financial obligations. They, in turn, want Mr. McConnell to honor his demand that Democrats lift the ceiling alone — either by granting consent to move to a vote or by providing 10 Republican votes to break the filibuster.

“We’ve already presented Republicans numerous opportunities to do what they say they want, including by offering a simple majority vote so Democrats can suspend the debt ceiling on our own as Republicans have asked,” Senator Chuck Schumer of New York, the majority leader, said on Wednesday. “But each time, Republicans have chosen obstruction.”

While top Republicans have said most of their members would privately support allowing Democrats to move forward on their own, they have been unwilling to vote publicly that way, and any single senator can object and force a vote.

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