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How Congress can eliminate the debt ceiling


US Treasury Secretary Janet Yellen speaks as US President Joe Biden holds a meeting with business leaders and CEOs about the debt ceiling at the White House in Washington, USA on October 6, 2021.

Kevin Lamarque | Reuters

Raising the debt ceiling used to be routine in Washington, but over the years it has become a partisan battleground, creating perpetual crises that undermine global confidence in American markets and threaten to plunge the US economy into recession .

The nation is weeks away from another such predicament. After Congress raised the debt ceiling by a few days earlier this month, it will have to react again before some point in December. And another party brawl is brewing over the action that gives the Treasury Department a chance to pay for programs that lawmakers have already approved.

Given how predictable and potentially catastrophic this traffic collapse is, it’s a wonder Congress hasn’t completely revised or lifted the credit limit.

There are ways you can do just that, even if it’s probably not before the next deadline. Key players on both sides of the aisle have suggested solutions. Treasury Secretary Janet Yellen and Kentucky GOP chief Mitch McConnell have endorsed dramatic debt line rewritings over the years.

Ten years ago, McConnell came up with the idea of ​​putting the president in charge of lifting the credit limit pending review by Congress. Last month, Yellen told the House of Representatives that she would support a bill that completely removes the cap or allows the Treasury Secretary to revise it from time to time.

It might be time for Republicans and Democrats to look into the options. Without a measure to lift or suspend the debt limit, the Ministry of Finance says it only has enough funds to pay the country’s bills by early December.

Abolition of the debt ceiling

One option is to remove the debt limit entirely.

Yellen told House MPs in September that she supports some laws that effectively lift the credit limit in its current form. She noted that taxes and spending are decided by Congress, but said it should provide better ways to meet those commitments.

“If it is necessary to run up additional debt in order to fund these spending and tax decisions, I find it very disruptive to put the President and myself, the Treasury Secretary, in a position where we have the bills resulting from this past , may not be able to pay. ” Decisions, “she said on September 30th.

There are at least two bills in the current Congress that could address Yellen.

The first, in May by Sens. Chris Van Hollen, D-Md., Brian Schatz, D-Hawaii, and Michael Bennet, D-Colo. introduced would remove the cap.

“Paying our debts should be an automatic act, not a politicized weapon used as a lever,” Schatz said in a press release released in May. “It’s clear that the debt ceiling isn’t about fiscal responsibility, it’s about unnecessary brinkness.”

More recently, Vice Chairman of the House Budgets Committee, Brendan Boyle, D-Pa., And Chairman John Yarmuth, D-Ky., Introduced the Debt Ceiling Reform Act, a law that relieved Congress of its authority over credit limits release and this authorization to the tax office.

The two Democrats in the House of Representatives tabled their two-sentence bill at the end of September.

When asked to clarify Yellen’s thoughts, both the Treasury Department and the White House declined to comment.

The McConnell pitch

An alternative proposal came in 2011 when McConnell, then and now a Senate minority leader, proposed a plan to avoid impending national bankruptcy.

With Congress closer than ever to the nation’s drop-dead date and S&P downgrading US creditworthiness, McConnell put forward a plan that would have guaranteed the president’s demands for new state lending powers.

“The president as CEO of the nation would inform Congress of the new debt ceiling, and Congress could block it with a joint resolution,” said Tom Block, policy analyst at Fundstrat Global Advisors.

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The plan that McConnell came up with 10 years ago contains clever and pragmatic elements.

With the bulk of federal spending tied to presidential election promises, McConnell’s strategy would force the White House to take responsibility for lifting the debt ceiling. If Congress finds the plan too extreme, lawmakers could then pass a bill preventing the White House from adjusting the cap as proposed.

The bill would then go to the Oval Office, where the president would presumably veto a bill that challenged the government’s proposal. That rejection would make it possible to raise the debt ceiling as planned or get Congress to lift the veto by a two-thirds majority.

In the current party-political era, it is rare to find enough politicians to secure a majority, let alone a two-thirds super majority. That means the McConnell Plan probably wouldn’t forego raising the debt ceiling unless the president’s proposal were absurd enough to unite 67% of federal lawmakers.

A McConnell representative declined to comment on the story.

The idea has legs. Senator Joe Manchin, the powerful Conservative Democrat from West Virginia, said Tuesday that he would support such a debt ceiling reform.

It should be set up so that “the president has the right to make this decision, we have the right to override it if we think he has gone too far,” he said.

While the minority leader may have been open to such a plan in 2011, there is little evidence to suggest that he now supports it. Additionally, the bill that resolved this year’s debt crisis likely attracted McConnell as it curbed government spending and deficits.

Sen. Lamar Alexander, R-Tenn., Sen. John Barrasso, R-Wyo., Sen. Orrin G. Hatch, R-Utah, and Senate Minority Leader Mitch McConnell, R-Ky., During a press conference following the Senate luncheon the Republicans in the US Capitol.

Scott J. Ferrell | CQ Roll Call, Inc. | Getty Images

Manchin’s comments came particularly when he urged President Joe Biden’s social and climate spending plan to be shrunk. Raising the debt ceiling does not entitle you to new government spending. Instead, it allows the Treasury Department to continue paying bills that Congress has amassed from legislation already passed.

That hasn’t stopped Republicans and Democrats from leveraging the threat of the nation’s very first default and economic disaster to score political points.

Most economists, including Yellen and former living Treasury Secretary, say that defaulting on payments would trigger a recession and put the full faith and credit of the United States at risk. US bonds would be less attractive to bondholders around the world, causing interest rates to rise and undermining the stability of the US dollar as the world’s reserve currency.

The next showdown

While the leaders of both parties have from time to time pushed for substantial changes to the debt ceiling, it is uncertain whether lawmakers can find enough support in the near future.

Without major restructuring, the legislature has two options for action before the imminent December deadline.

The first requires bipartisanism: Democrats can try to convince 10 Republicans to vote with them to block a GOP filibuster with 60 votes. This would enable the GOP to make demands that would likely include a drastic reduction or complete abandonment of the $ 2 trillion Democratic Reconciliation Act.

House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Chuck Schumer will attend a press conference on July 20, 2021 at the US Capitol in Washington, USA, with mothers who are helping with child tax credit payments will.

Elizabeth Frantz | Reuters

With Democrats campaigning for pledges to overhaul the country’s physical infrastructure and legislate on progressive priorities such as climate change and poverty, this option is not realistic.

McConnell, meanwhile, has promised that all Republicans will reject a debt-limit compromise as Democrats chose to force much of their agenda through Senate reconciliation.

Democrats will then be forced to use reconciliation, a special process that allows the Senate to pass by simple majority to raise the debt ceiling in December.

While this is their only realistic option, Democrats may not like the idea of ​​passing a debt ceiling increase through reconciliation, as it would force the party to vote for a dollar amount.

While Democrats have so far argued that the debt ceiling is a bipartisan responsibility, House spokeswoman Nancy Pelosi signaled on Sunday that she is open to Democrats acting through reconciliation alone.

“That’s a way. But we still hope to be non-partisan,” she said on CNN’s State of the Union.

– CNBC’s Nate Rattner contributed to this report.