WASHINGTON — Congress is poised to avert a default by the federal government following a one-of-a-kind deal that will suspend filibuster rules to allow Democrats on Tuesday or Wednesday to raise the debt limit without a single Republican vote.
So ends the latest political clash between Republicans and Democrats over a congressional approval to allow the U.S. Treasury Department to raise the debt limit, in this case by as much as $2.5 trillion through 2023 on top of the current $28.9 trillion limit.
Facing a Dec. 15 deadline — when Treasury Secretary Janet Yellen said the U.S. government would run out of cash — Senate Majority Leader Chuck Schumer (D-N.Y.) and Senate Minority Leader Mitch McConnell (R-Ky.) cooked up the unorthodox arrangement.
"I am really pleased that this chamber has just passed legislation setting up a fast-track process for debt ceiling legislation. No brinkmanship, no default on the debt, no risk of another recession: Responsible governing won the day," Schumer said Thursday.
"We have reached an agreement on a one-time, one-shot, statutory process that will enable Democrats to raise the debt limit at a fixed dollar amount," McConnell said Wednesday.
"And every single Senate Democrat will have to put their name to the gigantic dollar amount of debt they’re prepared to pile on the American people," he said.
Here are questions and answers about the debt limit and how it has become a political weapon.
What is the debt limit?
The statutory debt limit — also called the debt ceiling — applies to almost all federal debt. When federal government spending on obligations and interest reaches a debt limit, Congress must act to raise the amount of debt Treasury can incur.
In the early days of the country, Congress approved each issuance of debt. But in 1917 it created the debt limit to bundle debt issues for World War I. In 1939 with World War II looming, Congress set an aggregate debt limit and authorized the Treasury Department to handle it.
How often does Congress raise the debt limit?
The vote to raise the Treasury Department’s borrowing authority this week will be the 101st time Congress has raised the debt limit since 1940, according to Congressional Research Service reports. Congress last raised the debt limit by $480 billion in October as a temporary fix because the suspension of the debt limit Congress passed in August 2019 had ended on July 31.
Why hasn’t the government defaulted?
Yellen said she has been taking "extraordinary measures" since July 31 to pay bills and avoid default, but she warned that Treasury was running out of time and tricks.
What led to the need for a higher debt limit?
McConnell and Schumer point fingers at each other’s legislation, and both are right to some extent, said Marc Goldwein, vice president and policy director at the nonpartisan Committee for a Responsible Federal Budget.
McConnell said the two-year debt limit suspension in 2019 covered the borrowing during the Trump years, but Democrats are racking up future debt. Schumer said the new debt limit hike will pay for the continuing cost of Trump’s tax cuts as well as Democrats’ bills.
"The last debt limit increase covered all of the debt that was issued over the course of the Trump administration, plus the first six months of the Biden administration," Goldwein said of the two-year suspension that Congress passed in 2019.
"So, it's both the case that they raised the debt limit enough to cover all the borrowing that took place during the Trump presidency," he said, "and it's the case that they did not raise the debt limit enough to cover all of the debt that took place as a result of the Trump presidency."
How did the fiscal matter of paying government debts become political?
In the 1980s, the Republican Senate majority tried to cut the budget to lower the federal deficit, but the Democratic House majority blocked them to preserve social programs, creating a deadlock.
In 1985, Sen. Phil Gramm (R-Texas) came up with a fix, saying, "We won't raise the debt limit unless we change the [budget] process," according to William Hoagland, who was Senate Budget Committee staff director at the time.
Hoagland told Newsday that led to passage of the "infamous" Gramm Rudman Hollings Balanced Budget Act that forced cuts in domestic and defense programs with targets for reducing costs each year.
"This is when it started to become more political, when you use the debt limit for trying to achieve a political or a fiscal outcome," said Hoagland, now senior vice president of the Bipartisan Policy Center.
What created the current standoff on the debt limit?
McConnell said Senate Republicans won’t help raise the debt limit because Democrats plan to pass the Build Back Better Act with a price tag of as much as $2 trillion without any Republican votes by using a process called budget reconciliation. McConnell insisted that Democrats use a reconciliation process to raise the debt limit as well. Schumer refused to do so. A stalemate ensued.
How did the standoff become resolved?
Neither Schumer nor McConnell wanted to see a default, which would send shock waves and possibly start an economic recession, but they did not want to give in politically.
McConnell relented and allowed a temporary fix in the debt limit. But he stuck to his position on making the Democrats bear the burden of voting for raising the debt limit through next year. Schumer also rejected the demand that he raise the limit through reconciliation.
Behind closed doors, they reached a deal last week to change the process. The House last Wednesday approved an unusual rule that effectively suspended the Senate filibuster for one bill to raise the debt ceiling. On Thursday, the Senate approved that procedural bill in a vote in which 14 Republicans joined all Democratic caucus members.
In the next few days, the Senate will take up the debt limit bill itself.
And it will not face a Senate filibuster requiring 60 votes, so Republicans don’t have to approve a debt limit and Democrats can pass it with a simple majority.
When the debt limit expires in 2023, Republicans could control the Senate, and Schumer and McConnell could exchange places — with McConnell facing a challenge from Schumer on a debt-limit increase.
McConnell likely will not be overly worried.
As he said a month ago, "We’ll figure out how to avoid default. We always do."