The legal limit on how much debt the U.S. government can owe was reimposed Sunday, kicking off a high-stakes battle over federal spending with dire implications for global financial markets.
A two-year deal to suspend the debt ceiling lapsed at midnight following inaction from Congress and President BidenJoe BidenCDC chief clarifies vaccine comments: ‘There will be no nationwide mandate’ Overnight Defense: First group of Afghan evacuees arrives in Virginia | Biden signs Capitol security funding bill, reimbursing Guard | Pentagon raises health protection level weeks after lowering it Biden urges local governments to stave off evictions MORE to give the U.S. more borrowing authority. The Treasury Department will now begin taking what it refers to as “extraordinary measures” to prevent the U.S. from defaulting on its debt.
Those steps are likely to avert a default until October or even November before Biden will need to sign a bill to raise or suspend the limit again.
The expiration of the debt limit has triggered numerous partisan standoffs over the past decade, most recently in 2019. Each time, Congress has raised or suspended the debt limit. But the weeks before a potential default have often been the most tense, both for financial markets and administration officials.
“I respectfully urge Congress to protect the full faith and credit of the United States by acting as soon as possible,” Treasury Secretary Janet YellenJanet Louise YellenFed chief holds firm amid inflation concerns The Hill’s Morning Report – Presented by Facebook – Officers recount the horror of Jan. 6 GOP sees debt ceiling as its leverage against Biden MORE wrote in a letter to congressional leaders last week, warning that they risked “irreparable harm to the U.S. economy and the livelihoods of all Americans” by delaying action.
There is no clear path to a bipartisan agreement as Republicans hold out for spending cuts that Democrats refuse to consider.
While Democrats have slim majorities in both the House and Senate, they will still need the support of 10 GOP senators to avoid a filibuster on legislation to raise or suspend the debt ceiling.
Republican leaders have told Democrats that there can be no bipartisan debt ceiling agreement without a slate of debt reduction measures targeting the roughly $28 trillion national debt. Several GOP lawmakers have floated a deal similar to the 2011 Budget Control Act, which ended a debt ceiling standoff shortly before the U.S. suffered its first ever credit downgrade.
Democrats, however, argue that tying a debt ceiling increase to any controversial legislation is akin to holding the financial system hostage.
Without help from Republicans, Democrats would have to approve a debt ceiling hike through a budget reconciliation measure, which only needs a simple majority to pass in each chamber but would require support from all 50 Senate…
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