The Senate on October 7th approved legislation that lifts the debt ceiling, allowing the federal government to continue to issue debt until December 3rd – the same date that funding the federal government is set to expire.
President Joe Biden last month signed legislation into law that extends funding for the federal government to December 3rd.
As for the Senate-passed debt ceiling bill, the House must approve it before it can become law. That chamber is expected to act on the bill before the debt ceiling needs adjustment, which the Treasury Department projects should occur by October 18th.
Today’s action in the Senate comes on the heels of the chamber postponing a procedural vote Wednesday on legislation that would have suspended the debt ceiling until December of 2022. This legislation has been amended and is now the vehicle to increase the debt ceiling by $480 billion so that borrowing can continue into December.
How This Affects the $3.5 Trillion Tax and Spending Bill:
The progress on finalizing the tax and spending bill has recently slowed, in part because Democrats (who are the only lawmakers expected to ultimately support this bill) have had to split their focus over the past few weeks between this bill, negotiations on funding the federal government and lifting the debt ceiling.
The multi-pronged focus was partly responsible for lawmakers missing their original deadline to complete the tax and spending bill by September 27th. They are also expected to miss their October 31st deadline as well. It is now expected that the legislation could be finalized in December, according to Senate Majority Whip Dick Durbin (D-Ill.).
The primary cause for delaying the deadline into December is that Democrats are at odds over what provisions should be included in the bill, which is expected to have a shrinking price tag.
The legislation’s ultimate price is expected to be less than $3.5 trillion. Based upon current negotiations, there appears to be some agreement among Democrats that the bill’s ten-year cost could be somewhere between $1.9 trillion to $2.9 trillion.
Democrats are debating whether to adjust all measures to fit the lower-cost bill or cut provisions from the legislation. However, they must first agree on the total cost of the bill, and progress in that area is lacking.
Not an Option:
Come December 3rd, Congress will once again have to wrestle with increasing the debt ceiling. Senate Mitch McConnell (R-Ky) has repeatedly said that members within his caucus will not vote for this increase.
Without Republican support, Democrats might be forced to use the budget reconciliation process to increase the debt ceiling after December 3rd.
The budget reconciliation process is what was used to create the sure-to-shrink $3.5 trillion tax and spending bill. This budget procedure is fraught with procedural hurdles that can be very time consuming. Its most rewarding attribute is that reconciliation bills only require a simple majority to pass the Senate, which Democrats can do on their own.
Here’s the problem: Senate Democrats have repeatedly said that they will not use reconciliation to increase the debt ceiling.
So, the question becomes: Then what legislative vehicle will be used?
A bill under “regular order” is subject to a filibuster, which Senate Republicans have vowed they will initiate if debt ceiling legislation takes this path. Barring President Biden acting on his own to raise the debt ceiling, which is constitutionally questionable, it is not clear how Democrats plan to increase the debt ceiling without using the budget reconciliation process.
What If:
Democrats have said that they won't take the reconciliation route to address the debt ceiling, but below are how things could shake-out if they do.
Democratic congressional leaders have two options. One: A stand-alone reconciliation bill that only addresses the debt ceiling. Two: Address the debt ceiling in the tax and spending bill that is currently stalled in Congress.
If Democrats use reconciliation to create a stand-alone debt ceiling bill, they would have until December 3rd to clear the many procedural hurdles that come with cobbling together a reconciliation bill. There is plenty of time to complete such legislation.
If Democratic lawmakers address the debt ceiling by adding it to the tax and spending bill, the provisions in that legislation would become a part of a must-pass bill because the debt ceiling must be addressed. This means that any tax provisions included in that bill would likely become law.
Bottom Line:
The tax and spending reconciliation bill is definitely troubled. And there is a lot of skepticism in Washington D.C. on whether this bill will pass Congress. But this legislation is a must-pass bill for the White House and Democrats in Congress. Whether it is tied to the debt ceiling or whether it stands alone, Democrats will do everything in their power to enact this bill.
This means the bill will change in order to win enough support from Democrats to pass Congress. And those changes might not be made public for a while.
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