Senate Republicans block US debt-limit hike as shutdown looms

Lawmakers have just three days to avert a possible government shutdown.
Lawmakers have just three days to avert a possible government shutdown.PHOTO: AFP

WASHINGTON (REUTERS) – US Senate Republicans for a second day in a row blocked a bid by President Joe Biden’s Democrats to head off a potentially crippling US credit default, as partisan tensions rattled an economy recovering from the Covid-19 pandemic.

With federal government funding due to expire on Thursday and borrowing authority set to run out around Oct 18, Democrats who narrowly control the Senate and House of Representatives are working to head off twin fiscal disasters while also trying to advance Biden’s ambitious legislative agenda.

Senate Republican leader Mitch McConnell has insisted that Democrats use a parliamentary maneuver to temporarily lift the government’s US$28.4 trillion (S$38 trillion) debt limit without Republican votes, although Democrats note that about US$5 trillion of the nation’s debt is the result of tax cuts and spending passed during Republican Donald Trump’s presidency.

The two critical deadlines have added disarray to a complicated autumn for Democrats, who are deeply divided over a pair of Bills worth some US$4.5 trillion that form the core of Biden’s agenda.

Democratic Senator Chris Coons told Reuters that a Bill to avoid a shutdown could advance in Congress on Wednesday.

“I think more likely than not” that such a Bill will be on the Senate floor, Coons said, adding: “It will come over from the House.”

Lawmakers now have just three days to avert a possible government shutdown by midnight on Thursday, the end of the current fiscal year. Failure to do so could results in furloughs for hundreds of thousands of federal workers in the middle of a public health crisis.

Fiscal brinkmanship has become a regular feature of US politics thanks to partisan polarisation.

The most recent government shutdown, which occurred during Trump’s presidency, lasted 35 days before ending in January 2019.

A measure passed by the House last week would fund the government through Dec 3. If Congress were to pass a measure on Wednesday with a similar timeline, it still would have to deal with providing the Treasury Department with additional borrowing authority.

Treasury Secretary Janet Yellen told lawmakers the government would run out of options to service the debt by Oct 18.

Coming ahead of next year’s congressional elections, a government shutdown or default would be a blow for Democrats, who have portrayed themselves as the party of responsible government after Trump’s chaotic presidency.

No. 2 House Democrat Steny Hoyer said the chamber may vote on Wednesday on a resolution to continue funding the government.

“We’ll see what the Senate sends us... They’re trying to send us something,” he told reporters.

‘Potentially catastrophic’

The nation’s largest lender, JPMorgan Chase & Co, has begun scenario planning for how a potential US credit default would affect its operations, chief executive Jamie Dimon told Reuters on Tuesday.

“This is like the third time we’ve had to do this. It is a potentially catastrophic event,” Dimon said. “We should never even get this close.”

Senate Majority Leader Chuck Schumer proposed holding a vote to raise the debt limit that could pass with just the support of the chamber’s 48 Democrats and the two independents allied with them as long as Republicans agreed to allow the vote to occur.

“If Republicans really want to see the debt limit raised without providing a single vote, I’m prepared to hold that vote,” Schumer said on the Senate floor.

But McConnell insisted the responsibility for the debt ceiling was Schumer’s and not his own. “His responsibility is to raise the debt ceiling,” McConnell said. “He has the responsibility. And trust me, he will do it.”

Biden's legislative agenda

Democrats are also struggling to unite behind two pillars of Biden’s domestic policy agenda: a US$1 trillion infrastructure Bill and a social spending package pitched at US$3.5 trillion that leaders have said will likely need to be trimmed.

The larger measure could take several weeks to pass Congress and reach Biden’s desk, dangerously close to the debt-limit deadline.

The Democrats originally planned to handle the social spending Bill, championed by the party’s left wing, in tandem with the infrastructure package, which has drawn bipartisan support. But they have scheduled a House vote on the infrastructure Bill on Thursday even though the spending package is still being negotiated.

Lawmakers on the party’s left insisted that Congress must first pass the social spending Bill.

“We articulated this position more than three months ago, and today it is still unchanged,” Representative Pramila Jayapal, leader of the Congressional Progressive Caucus, said in a statement.

Senate Budget Committee Chairman Bernie Sanders, a powerful voice among left-leaning lawmakers, urged his House allies to oppose the infrastructure bill on Thursday, writing on Twitter that its passage would end their leverage to move forward on the larger reconciliation package.

Democratic Representative Jim McGovern acknowledged that the stakes of the negotiations were high, saying: “Failure on both these Bills is not an option.”