Is debt ceiling debate a ‘game of chicken’ between Dems and GOP?
Former Congressional Budget Office Director Doug Holtz-Eakin on the options for the U.S. debt ceiling.
Senate Minority Leader Mitch McConnell rejected a request by Treasury Secretary Janet Yellen for Republicans to join Democrats to raise or suspend the debt ceiling before the federal government runs out of cash to pay its bills in October.
"The Leader repeated to Secretary Yellen what he has said publicly since July: This is a unified Democrat government, engaging in a partisan reckless tax and spending spree," McConnell spokesperson Doug Andres said Thursday. "They will have to raise the debt ceiling on their own, and they have the tools to do it."
For months, Yellen has been urging Congress to increase the government's borrowing limit, warning the Treasury Department will exhaust its so-called extraordinary measures in October.
WHAT IS THE DEBT CEILING?
Yellen will "continue to talk to Republicans and Democrats about the critical need to swiftly address the debt ceiling in a bipartisan manner, to avoid the catastrophic economic consequences of default," a Treasury spokesperson told Punchbowl News, which first reported Yellen's call to McConnell.
The debt ceiling, which hit $22 trillion in August 2019, is the legal limit on the total amount of debt that the federal government can borrow on behalf of the public, according to the Committee for a Responsible Federal Budget (CRFB). Once the suspension lifted, the new limit was reinstated around $28.5 trillion, a figure that includes debt held by the public and the government.
At the beginning of August, the Treasury Department began deploying so-called extraordinary measures to ensure the government can continue to pay its obligations for the time being. But if the debt ceiling is not raised or suspended, the U.S. government can no longer issue debt and will soon run out of cash on hand.
But Senate Republicans are resisting a move to raise the nation's borrowing limit, with 46 of them pledging to oppose any increase this fall with a vote that would require at least 10 GOP lawmakers to pass.
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"Let’s be clear: With a Democratic President, a Democratic House, and a Democratic Senate, Democrats have every tool they need to raise the debt limit. It is their sole responsibility," McConnell tweeted Wednesday. "Republicans will not facilitate another reckless, partisan taxing and spending spree."
Congressional Democrats could use their partisan $3.5 trillion tax and spending bill to raise the debt limit, but have said they will not do so. Instead, Democrats are intent on pressuring Republicans to join them in suspending the ceiling – noting that when former President Donald Trump was in office, there were several bipartisan efforts to do so.
If the U.S. failed to raise or suspend the debt limit, it would eventually have to temporarily default on some of its obligations, which could have serious and negative economic implications. Interest rates would likely spike, and demand for Treasurys would drop; even the threat of default can cause borrowing costs to increase.
While the U.S. has never defaulted on its debt before, it came close in 2011, when House Republicans refused to pass a debt ceiling increase, prompting rating agency Standard and Poor's to downgrade the U.S. debt rating one notch.
The nonpartisan Congressional Budget Office estimated at the end of July that the government would probably run out of money to pay its bills sometime in the fall, likely October or November. The new debt ceiling, which will include the new spending approved by Congress over the course of the past two years, will likely be around $28 trillion, the CBO said.
Fox News' Jacqui Heinrich contributed to this report
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