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Senate Republicans blocked the Democratic Party’s proposed bill that sought to fund government spending and lift the debt ceiling that limits the level of debt the United States can take on. Monday’s failed vote could force Democrats to decouple the expansion of the government budget and lift the debt ceiling.
The Democratic Party planned to extend the additional government budget by Dec. 3, 2021, and suspend the debt ceiling until Dec. 16, 2022. Government funding would expire by October 1.
The Department of the Treasury has had to resort to emergency measures while the Government’s funds run out. However, these measures are on the verge of exhausting its resources.
“It is imperative that Congress address the debt limit, if not, our current estimate is that Treasury will likely exhaust its extraordinary measures by October 18th, that point we expect that the Treasury will be left with very limited resources that will be depleted quickly,” warned Janet Yellen, the Treasury secretary, at Tuesday’s hearing before the Banking, Housing and Urban Affairs Committee.
According to Yellen, “America will default for the first time in histroy, the full faith in Credit of The United States will be impaired and our country would likely face a financial Crisis and a recession as a result.”
Yellen warns that Social Security payments, child tax credits, or exceptional provisions assumed for the pandemic could be at risk if the U.S. is unable to meet its obligations.
Federal Reserve Chairman Jerome Powell, who also participated in the hearing, supported his colleague’s view and warned that it was “essential” to lift the debt limit or the consequences “could be severe.”
No bipartisan agreement
While both parties recognize the need to increase the debt, Republicans do not want to get involved in trying to pay for President Joe Biden’s stimulus plan.
Although Democrats could approve lifting the debt ceiling through the reconciliation procedure, which would require the favorable vote of their 50 senators and Vice President Kamala Harris, they do not want to use this card they might need for the approval of the $3.5 trillion human capital plan.
Democrats have argued that in the past they have voted positively to raise or lift the debt ceiling when Republicans have had a majority in the Senate. The last time the debt ceiling was lifted was in 2017 during the Trump administration.
Senate Minority Leader Mitch McConnell (R,Ky.) attempted to bring the increase in the government’s short- and medium-term budget to debate without considering a debt ceiling increase, but Democrats blocked the initiative.
“Democrats control the entire government—the Senate, the House and the White House. They intend to sideline Republicans and go it alone to slam American families with historic tax hikes and borrowing […] so they will need to raise the debt limit on a partisan basis as well,” he said.
McConnell clarified that the Republican Party agrees to approve funds for the government to avoid a partial administrative shutdown as of Friday, but not on the suspension of the debt ceiling. “We will support a clean continuing resolution that will prevent a government shutdown. We will not provide Republican votes for raising the debt limit,” the Senate minority leader said.
Economist, writer and liberal. With a focus on finance, the war on drugs, history, and geopolitics // Economista, escritor y liberal. Con enfoque en finanzas, guerra contra las drogas, historia y geopolítica