On Monday, Senate Republicans voted against raising the U.S.’s debt limit, rejecting a measure that would have avoided a government shutdown and provided billions for disaster aid and Afghan refugees. If Congress continues its deadlock, economists project that the looming shutdown and debt default could lead to an economic crash.
Though some Republicans had considered voting for the debt limit raise to help the U.S. avoid a default, ultimately, they all aligned against the measure. If Democrats can’t work out a funding solution by Thursday, the government will shut down Friday morning in the midst of the pandemic. Economists warn that even a short shutdown could upend global markets, creating spiked interest rates on Treasury bonds in the long term.
Further, if the U.S. defaults on its debts, a situation which Republicans have been threatening to create, the resulting economic downturn could be disastrous and even trigger a recession if left unchecked for long enough. Economists estimate that the “X date” — the day that the government would run out of funding and be forced to choose between defaulting on its debts or paying out crucial social programs — could come as early as mid-October.
Even if a default never happens, the possibility of it happening could alarm markets just as the economy is making a nascent recovery from the pandemic. Treasury Secretary Janet Yellen has warned Democratic leaders that a default, which would be unprecedented, must be avoided.
Democrats now have limited options when it comes to avoiding a shutdown. Senate Majority Whip Dick Durbin (D-Illinois) has said that putting the debt ceiling hike into the reconciliation bill, which can pass via a simple majority in the Senate, is a “non-starter.” Some sources say the process would take at least 10 days, and Durbin has claimed it could eat up weeks.
Democrats could also present the debt ceiling as a standalone bill to avoid a shutdown, in which case Republicans would have to either support it or choose not to filibuster it, though both options are unlikely. Some experts say that the Biden administration could take steps to nullify the debt ceiling entirely — a nuclear option that some economic experts favor. Still, the options for Democrats are sparse, and with the uncertainty of the “X date,” the risk of defaulting grows closer each day.
Sen. Mitch McConnell (R-Kentucky) is leading his caucus in playing political brinkmanship over the debt limit, at once saying that he opposes a debt default while still imploring Republicans to oppose the measure that would prevent one anyway.
“It’s an unhinged position to take,” said Senate Majority Leader Chuck Schumer (D-New York). “There is no scenario in God’s green earth where it should be worth risking millions of jobs, trillions in household wealth, people’s Social Security checks, veterans’ benefits and another recession just to score short-term, meaningless political points.”
Though there are few apparent and immediate benefits to McConnell’s dangerous debt limit threat — other than, perhaps, trying to block the reconciliation bill — former President Donald Trump noted that the GOP would be “foolish” to not use the debt ceiling as a tool to get ahead. “The only powerful tool that Republicans have to negotiate with is the Debt Ceiling, and they would be both foolish and unpatriotic not to use it now,” Trump said.
On this, Trump isn’t entirely wrong — refusing to raise the debt ceiling gives Republicans the power to manipulate Democrats and spout whatever message they want about Democratic leadership, especially when it comes to policies that they describe as Democrats’ “tax-and-spend” agenda.
But this game is potentially destructive, and political writers and lawmakers have noted that the recklessness on display by Republicans — just so they can hold more tools to attack Democrats — is both cynical and shameless.
“It’s time to call the Republicans out over this: Are you kidding me on the debt ceiling?” said Sen. Elizabeth Warren (D-Massachusetts) on MSNBC last week. “What are we trying to raise the debt ceiling for now? To cover the debts that were incurred during the Trump administration. And the Republicans want to turn around and play political games with that? They want to threaten to blow up our entire economy — and actually, the world economy — over that?”