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Congress, Biden Yet Again Face Potential Shutdown and Debt Ceiling Crisis

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A few weeks ago, Congress decided to put off the debt ceiling crisis and the shutdown discussion, the time has come to tackle this issue once again as Democrats and Republicans are preparing for another vicious round of political fighting over the financial stability of the United States, as both chambers will have to decide (once again) how to raise the national debt ceiling before the Treasury runs out of money in mid-December and if they would extend the funding of the federal government, whose funding is set to expire on December 3.

 If Congress fails to agree on a way to either raise or suspend the debt ceiling, the federal government would be facing default and potential financial meltdown with the Treasury unable to meet its financial responsibilities in the short term. Furthermore, if Congress does not reach an agreement on how to keep the government funded, the United States could be also facing a government shutdown in a few days.

Congress is facing the potential of a government shutdown and a financial meltdown for the second time in less than three months (EFE)

What is the debt ceiling and why should it be raised?

The debt ceiling, as its name indicates, limits the amount of money the federal government is allowed to borrow. Usually, the United States government spends more money than it collects through taxes (something called a deficit), which the Treasury pays by issuing debt, if the debt limit is not increased then the government is not able to raise more debt and will be unable to pay for the expenditure that Congress has already approved. Hence, a vote to increase the debt ceiling is not a vote to increase federal spending, as the new debt will be used to pay for the spending that Congress has already approved before.  

While Congress has been occupied with Democrat’s infighting over the amount of money they will finally decide to spend if they pass their reconciliation bill, the issue of the debt ceiling has lurked in the background, with both parties entrenched in their positions, with Republicans arguing that Democrats should raise the debt ceiling unilaterally and Democrats arguing that the GOP should also vote in favor of raising the ceiling.

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Senate Minority Leader Mitch McConnell reached a deal last October to temporarily raise the debt ceiling (EFE)

The country faced an identical situation just a few months ago when both houses of Congress made a deal in October to temporarily raise the debt ceiling by $480 billion, which would give enough room for the Treasury to keep its financial commitments until mid-December. The October deal was reached after weeks of uncertainty, with Senate Minority Leader Mitch McConnell (R-KY) reaching a last-minute agreement with the Democratic leadership, and managing to convince nine of his fellow Senators to vote to extend the debt ceiling to avoid a default.

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Democrats could raise the debt ceiling without any Republican votes by using the budget reconciliation process, which they are already intending to use to pass their $2 trillion spending plan. However, back in October, they refused to use this procedure, arguing that it was time-consuming and that it was not clear if the debt ceiling could be raised on time, furthermore, it is unlikely that Democrats would like to use budget reconciliation before they reach an agreement over the size and scope of their spending package that passed the House last week.

Is there any difference between the debt ceiling and a government shutdown?

Yes, while both issues have an effect on the financial capabilities of the federal government, they are two separate issues. While the debt ceiling deals exclusively with the ability of the Treasury to issue new debt, a government shutdown occurs when Congress does not authorize new funds to keep the government functioning, which usually leads to thousands of government workers being sent to their homes and essential workers in furlough (working without a pay) until Congress appropriates new funds.

Just a few days before Congress reached a temporary deal on the issue of the debt ceiling, both Houses voted to temporarily extend the government funding to December 3, through a mechanism known as a continuing resolution, which effectively postpones the discussion and keeps the government-funded in the meantime. If Congress does not reach an agreement on how to keep the government funded after midnight December 3 — most likely through another Continuing resolution — then the federal government would be facing a shutdown.

Just like in late September, the government is facing the dual threat of government shutdown and financial meltdown. It will be up to lawmakers to decide if they would rather kick the can down the road again, provide a longer-term solution or fail to reach any solution at all.

Daniel is a Political Science and Economics student from the University of South Florida. He worked as a congressional intern to Rep. Gus Bilirakis (FL-12) from January to May 2020. He also is the head of international analysis at Politiks // Daniel es un estudiante de Cs Políticas y Economía en la Universidad del Sur de la Florida. Trabajo como pasante legislativo para el Representate Gus Bilirakis (FL-12) desde enero hasta mayo del 2020. Daniel también es el jefe de análisis internacional de Politiks.

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