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Mitch McConnell reverses on the debt ceiling as Congress poised to get another 2 months to avoid a government default

Oct 8, 2021, 15:03 IST
Business Insider
Senate Minority Leader Mitch McConnell, R-Ky., arrives to speak to reporters ahead of a test vote scheduled by Democratic Leader Chuck Schumer of New York on the bipartisan infrastructure deal senators brokered with President Joe Biden, in Washington, Wednesday, July 21, 2021. AP Photo/J. Scott Applewhite
  • The Senate on Thursday approved a debt-limit extension, sending it to the House.
  • The move is a reversal for Sen. Mitch McConnell, who had urged the GOP to block Democrats' efforts.
  • The deal punts the risk of a default to December, when Congress will again have to act.

The Senate on Thursday approved a measure to extend the debt limit through early December, defusing a perilous showdown that brought the US to the edge of default. The bill now goes to the House for a vote sometime next week.

The tally was 50-48, with every Senate Republican opposed to the measure during final passage. But 11 GOP senators, including Senate Minority Leader Mitch McConnell, joined Democrats to cut off debate and break the filibuster's 60-vote threshold in an initial procedural vote.

"Republicans played a risky and partisan game, and I am glad their brinkmanship didn't work," Senate Majority Leader Chuck Schumer said in a floor speech.

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McConnell first reversed course Wednesday afternoon, offering Democrats a short extension to at least temporarily avoid a government default. The Kentucky Republican had been blocking Democrats' efforts to raise the ceiling since early last week. Thursday's vote marked a reversal from that stance and arrived just 11 days before the government's estimated deadline for a default.

It raises the debt ceiling by $480 billion, letting the government continue borrowing freely until December, according to Treasury Department estimates.

Many Republicans were unhappy with McConnell's olive branch, and the party struggled to scrounge up enough votes to cross the 60-vote threshold to end debate.

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"We need to be able to get on this," Sen. Lisa Murkowski of Alaska told Insider. "The only way we're going to be able to get on this is if we can get 60 votes. I'm going to be one of those 60."

Most Senate Republicans were lined up in opposition to the debt-limit extension. "Debt is not the friend of the American public, and we should resist it," Sen. Rand Paul of Kentucky told Insider.

The debt ceiling is the statutory cap on how much the government can borrow to pay its bills, which include pandemic relief and other key aid programs from the past two years. If Congress fails to raise the limit, the government can default on its debt and plunge the US into a new economic crisis.

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Thursday's deal essentially kicks the can down the road. Democrats are still reluctant to use the time-consuming process known as reconciliation to raise the limit without any GOP support. But McConnell was adamant Wednesday that Republicans still wanted them to do so - especially now that they have more time.

"This will moot Democrats' excuses about the time crunch they created and give the unified Democratic government more than enough time to pass standalone debt-limit legislation through reconciliation," he said in a statement.

Senate Republicans have maintained that Democrats must unilaterally raise the debt ceiling, arguing that the GOP wants no part in financing Democrats' yet-to-be-passed $3.5 trillion social-spending plan. But Democrats argued that raising the ceiling was a bipartisan responsibility, since doing so would cover debt incurred from both the Trump and Biden administrations, including President Donald Trump's $900 billion stimulus package from December.

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Democrats ramped up the pressure on the GOP throughout the week. President Joe Biden on Monday lambasted Republicans for their obstruction, and he spoke with business leaders on Wednesday about the harm a government default would cause.

"Not only are Republicans refusing to do their job - they're using their power to prevent us from doing our job of saving the economy from a catastrophic event," Biden said during the Monday press conference. "I think, quite frankly, it's hypocritical, dangerous, and disgraceful."

Brace for December deadlines

The GOP started to blink Wednesday as Democrats explored several options for raising the ceiling on their own. One solution to emerge was a one-time change to the filibuster that would let Democrats raise the limit with a party-line vote. Biden floated blowing a hole in the filibuster, telling reporters Tuesday that it was "a real possibility."

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It may well have forced McConnell's hand. "It's not an insignificant part of the calculation, I'm quite sure," Republican Sen. Kevin Cramer of North Dakota told Insider in an interview.

The minority leader has long warned that eliminating or weakening the filibuster would plunge the Senate into chaos. The moderate Democrats Joe Manchin and Kyrsten Sinema have been strongly opposed to any filibuster changes, but pressure on them to reverse course would most likely have intensified as the country hurtled toward default.

And default would be calamitous. Government funding would quickly freeze for Social Security beneficiaries, members of the armed services, and public workers. Moody's Analytics estimated the country would slide into a recession and lose nearly 6 million jobs, with American household wealth plummeting by an estimated $15 trillion as fears of a government default could tank stocks.

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Hitting the ceiling would also be disastrous for the country's global strength. The US dollar serves as the world's reserve currency, and its power relies on trust in the government to pay its debt.

Treasury Secretary Janet Yellen warned September 27 that nothing would be "more harmful" to the currency than a default. She said the dollar would quickly lose its relevance, interest rates would shoot higher, and Americans' payments on everything from credit-card bills to home loans would soar.

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