Biden Warns That U.S. May Breach Debt Limit, Blaming McConnell
(Bloomberg) -- President Joe Biden warned that the U.S. government is at risk of breaching the legal limit on its debt in two weeks, blaming Senate Republican Leader Mitch McConnell for what he described as a “meteor” headed for the economy.
Asked after a White House speech on the debt-limit dispute whether he could guarantee the U.S. wouldn’t exceed the ceiling on its debt, Biden answered: “No, I can’t.”
“That’s up to Mitch McConnell,” he added. “I can’t believe that that will be the end result because the consequence is so dire. I don’t believe that, but can I guarantee it? If I could, I would.”
In his remarks, Biden demanded that Republicans stop blocking Democratic efforts to suspend the debt ceiling, a legislative battle that’s brought the U.S. government to the brink of its first-ever default. The GOP has demanded Democrats use an involved legislative procedure to boost the limit without any Republican votes.
“What they’re doing today is so reckless and dangerous,” Biden said of Republicans. “A meteor is headed to crash into our economy. Democrats are willing to do all the work stopping it. Republicans just have to let us do our job.”
Dislocations in the U.S. Treasury market extended on Monday as investor concern increased. The yield on Treasury bills maturing Oct. 21 climbed as much as 3.8 basis points Monday morning, to 0.106%, with most bills maturing earlier and later yielding 0.05% or less.
The president said more than a quarter of U.S. debt, about $8 trillion, was incurred during the four years of the Trump administration, obligating Republicans to help raise the ceiling. Defaulting on the debt, he said, “would lead to a self-inflicted wound that takes our economy over a cliff.”
“Raising the debt limit is about paying off our old debts,” he said. “There’s nothing to do with any new spending being considered. It has nothing to do with my plan for infrastructure or building back better, zero, zero.”
Senate Majority Leader Chuck Schumer plans a vote for as early as Monday on a measure passed by the House to suspend the federal government’s legal debt limit until December 2022. But McConnell has vowed to block the attempt, just as he has two others.
McConnell on Monday called on Biden in a letter to pressure congressional Democrats into using the reconciliation process to boost the debt limit -- the same filibuster-bypassing procedure they’re employing for a social-spending bill that Republicans oppose.
“I plan on talking to Mitch about it,” Biden said of the letter. “I hope we can have some intelligent and honest conversation about what he’s proposing.”
He said the easiest way to resolve the matter would be for Republicans to cease filibustering the legislation to suspend the debt ceiling, allowing Democrats to pass it on a party-line vote. Reconciliation is a “cumbersome,” complicated and risky approach, he said.
Democratic leaders have repeatedly rejected the reconciliation approach as too time-consuming and involved, and in violation of the bipartisan tradition of addressing the debt limit regardless of disputes over other fiscal policy legislation. The rules of reconciliation would also require Democrats to raise the debt limit to a specific dollar figure, instead of simply suspending it, giving Republicans a campaign attack line.
The impasse threatens to increasingly unsettle financial markets as time passes. Treasury Secretary Janet Yellen has said her department will run out of cash around Oct. 18 if the debt ceiling is not lifted or suspended -- though some analysts outside the administration estimate the binding deadline to be a week or two later than that.
The debt limit is one of several fiscal challenges Biden and congressional Democrats are facing. Democrats continue to negotiate for an agreement to pass two other key pieces of legislation, an infrastructure bill and the social-spending package.
Congress has approached the brink of a default before, only to reach a last-minute agreement. Investors and fiscal analysts still expect that will happen again, though some caution that the current dynamic, in which neither political party appears willing to yield, appears more dire.
“The consensus (from clients to whom we speak) is that it just will not happen,” Barclays Plc analysts including Shawn Golhar, head of public policy research, wrote in a note last week. “But political schisms in Congress are stronger than they have been in a long time and battle lines more hardened.”
Senate Democrats could raise the debt ceiling without Republican votes using the filibuster-proof budget reconciliation process. Doing so would take about two weeks, budget experts have said.
Some of the uncertainty surrounding the process was clarified by the top Senate rules official in recent days. The Senate parliamentarian last week informed Senate leaders that the process can be completed through a standalone debt ceiling budget amendment and bill, independent from the spending bill Democrats are planning to pass via reconciliation.
Pursuing a debt-ceiling bill via reconciliation would not harm the ability to pass the tax and spending bill by evading a filibuster, parliamentarian Elizabeth MacDonough ruled, according to a person familiar with the matter.
While the process would force two sessions to consider unlimited amendments to a debt-ceiling bill on the Senate floor, any amendments would have to be germane to the debt, MacDonough said. The budget amendment would have to go through the Budget Committee, adding time to the process, but in the case of an expected tie vote by the panel, the bill could be discharged from committee by a floor vote under the current Senate 50-50 power sharing agreement.
None of the votes would be subject to a Republican filibuster.
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