The United States will face bankruptcy sometime between Dec. 21 and Jan. 28 if Congress does not step in to raise or suspend its debt ceiling, a Washington think tank warned Friday.
The Bipartisan Policy Center think tank’s projection was a narrower window than last month, and the impartial group suggested the actual deadline, or X-date, could be towards the earlier end of that range.
Democrats and Republicans seem to have tempered their tone this time around raising the debt limit. While lawmakers have yet to find a way to lift the borrowing limit, they are exploring a range of ways to raise it, including some that could eventually give more power to the White House to avoid the kind of deadlocks that routinely cripple Washington.
Republicans continue to publicly insist that Democrats must act alone to tackle the problem, while Democrats have contradicted that increasing the borrowing limit is a shared responsibility as both political parties have incurred huge debts in recent years.
“Those who believe the debt cap can be safely pushed to the back of the December legislative pile are misinformed,” said Shai Akabas, director of economic policy at the Bipartisan Policy Center. “Congress would flirt with financial disaster if it left for the holiday recess without tackling the debt limit.”
Treasury Secretary Janet L. Yellen warned lawmakers in November that the United States would not be able to pay its bills soon after December 15. Speaking before the Senate Banking Committee this week, she underlined the urgency of the matter.
“I cannot emphasize enough how important it is for Congress to address this issue,” said Ms. Yellen. “America must pay its bills on time and in full. If we don’t, we will wipe out our current recovery.”
In September, Ms Yellen called for the debt cap to be lifted, explaining that it had become a destructive policy, posing unnecessary risks to the economy. After hitting the first default in U.S. history, Congress raised the legal debt limit by $480 billion in October, an amount the Treasury Department said would allow the government to continue borrowing through early December.
Congressional leaders have been quietly discussing ways to tackle the debt ceiling after Republicans warned they wouldn’t help Democrats pass the 60-vote threshold needed to break a Republican filibuster against legislation to pass it. increase the loan limit.
Senators Chuck Schumer of New York, the majority leader, and Kentucky, the minority leader, Mitch McConnell, have discussed the issue repeatedly in recent weeks, but they have remained silent in public about a possible solution.
The debate has been further complicated by former President Donald J. Trump and his continued influence over the Republican Party. He has repeatedly berated Mr. McConnell and the other Republican senators who supported a procedural vote in October that paved the way for Democrats to raise the debt limit.
But while Mr. Insisting that Democrats would raise the loan limit without help from his conference, McConnell promised this week that a default would be avoided.
“Let me assure everyone that the government will not default, as it never has,” Mr McConnell said on Tuesday. Pushing even further, he added: “We are having useful discussions on the way forward.”
Aside from both the $1.9 trillion coronavirus aid package passed in March and the $2.2 trillion climate, tax and spending plan that Democrats are trying to push through the Senate, Republicans have refused to help Democrats push the Democrats through the Senate. to pay off the debts of both parties. They have taken that stance, even though leaders of both parties agreed to the spending that helped the debt balloon.
Democrats, in turn, have protested a Republican demand to use an expedited process known as fiscal reconciliation to raise the debt limit without Republican votes. Democrats used the process to approve the coronavirus aid package and they are using it again for the climate and tax plan, but they have argued that Republicans should help prevent government default.
Understand the US debt ceiling
What is the debt ceiling? The debt ceiling, also known as the debt limit, is a limit on the total amount the federal government is allowed to borrow through U.S. Treasury bills and savings bonds to meet its financial obligations. Because the US has budget deficits, it has to borrow huge sums of money to pay its bills.
While aides from both sides warned that no resolution had been found, they noted that party leaders had so far refrained from blaming the issue publicly.
As a way to get around the deadlock, some officials have discussed the possibility of handing the government the power to raise the debt limit, while giving Congress the option to reject the decision by just a simple majority.
However, some lawmakers may be unwilling to hand over that power to the White House or lose a baton often used by the minority party to exert pressure, especially while 60 votes are needed to end a filibuster. in the Senate.
Other officials have suggested linking legislation raising the debt cap to the comprehensive annual defense policy law, the latest major bill that lawmakers plan to pass in December.
But it’s unclear whether such a plan would be successful: A debt ceiling hike could jeopardize the Republican votes needed to endanger the bloc of liberal Democrats, who typically oppose the defense bill in protest of military spending. bring. Representative Kevin McCarthy, California Republican and minority leader, warned Friday that such a maneuver could impede the passage of the entire package.
The Bipartisan Policy Center said there was additional uncertainty about the debt cap this year because of the pandemic and the various economic aid programs still underway.
December 15 is a particularly important date as the Treasury Department has to make a $118 billion payment to the Highway Trust Fund. If corporate income tax receipts due that day become weak, the Treasury may face a cash shortfall and the United States may not be able to meet all of its obligations, such as Social Security payments and military paycheck financing. .
The Congressional Budget Office said this week it expected the treasury could run out of money by the end of December if Congress didn’t intervene. However, the budget bureau suggested that the Treasury could defer some of the Highway Trust Fund payments mandated in the recently passed infrastructure law, potentially preventing a default until sometime in January.
Along with its updated projection, the Bipartisan Policy Center unveiled a new proposal for dealing with the debt cap, though it’s unlikely to help lawmakers this time around.
The proposal, introduced by Representatives Jodey C. Arrington, Republican from Texas, and Scott Peters, Democrat from California, would establish a process that would give the president the power to suspend the debt limit until the next fiscal year, as long as Congress does not resolution assumes blocking the move within 30 days. The president would then have to present a debt reduction proposal for Congress to consider separately.