The United States is at risk of default sometime between December 21 and January 28 if Congress does not raise or suspend the debt ceiling, a Washington think tank warned on Friday.
The forecast by the think tank, the Bipartisan Policy Center, was a narrower window than last month, and the bipartisan group suggested that the actual deadline or X-date might be at the earlier end of that range.
Democrats and Republicans appear to have softened their tone on raising the debt ceiling this time around. While lawmakers haven’t agreed on a way to lift the credit limit, they are exploring a number of ways to raise it, including some that could ultimately give the White House more power to avoid the kind of stalemate that Washington routinely paralyzes .
Republicans continue to publicly insist that Democrats act alone to tackle the issue, while Democrats have countered that raising the credit limit is a shared responsibility as both parties have incurred large debts in recent years.
“Those who believe the debt ceiling can safely be pushed into the background of the December bill are misinformed,” said Shai Akabas, economic policy director at the Bipartisan Policy Center. “Congress would be flirting with financial disaster if it went on vacation without tackling the debt ceiling.”
Treasury Secretary Janet L. Yellen warned lawmakers in November that the United States would be unable to pay its bills shortly after December 15. When testifying before the Senate Banking Committee this week, she underscored the urgency of the matter.
“I cannot emphasize enough the importance of Congress addressing this issue.” Mrs. Yellen said. “America has to pay its bills on time and in full. If we don’t do this, we will eviscerate our current recovery. “
In September, Ms. Yellen called for the debt ceiling to be lifted, saying it had become a destructive policy that posed unnecessary risks to the economy. After nearing the first default in American history, Congress raised the statutory debt limit by $ 480 billion in October, an amount the Treasury Department estimates would allow the government to borrow further through early December.
Congressional leaders have been quietly discussing ways to tackle the debt ceiling after Republicans warned they would not help Democrats break the 60-vote threshold required for a Republican filibuster to oppose the legislation Raise the credit limit to break.
Senators Chuck Schumer from New York, the majority leader, and Mitch McConnell from Kentucky, the minority leader, have repeatedly commented on the issue in recent weeks, but have remained silent about a possible solution in public.
The debate was further complicated by former President Donald J. Trump and his continued influence over the Republican Party. He has repeatedly berated McConnell and the other Republican senators for backing a procedural vote in October that paved the way for Democrats to raise the debt ceiling.
But McConnell, while pushing the Democrats to raise the credit limit without help from his conference, promised this week that default would be avoided.
“Let me assure everyone that the government is not going bankrupt like it has never done before,” McConnell said Tuesday. Further urged, he added: “We are having useful discussions about how to proceed.”
The Republicans have refused to help the Democrats pay off the debts of both parties. They took this position despite the fact that the leaders of both parties signed the spending that contributed to the rise in debt.
The Democrats, in turn, have opposed a Republican request to use an expedited process known as budget reconciliation to raise the debt ceiling without a Republican vote. The Democrats used the process to pass the coronavirus bailout package and they are using it again for the climate, tax and spending plan, but they have argued that Republicans should help save the government from bankruptcy.
Understand the US debt ceiling
What is the debt limit? The debt ceiling, also known as the debt limit, is an upper limit to the total amount that the federal government can borrow through US Treasury bills and savings bonds to meet its financial obligations. Since the US has a budget deficit, it has to borrow huge sums of money to pay its bills.
Aides from both parties warned that a solution would be agreed, but noted that party leaders had so far refrained from publicly switching the blame for the problem.
To get around the impasse, some officials have discussed the possibility of empowering the government to raise the debt ceiling while allowing Congress to reject the decision by a simple majority.
However, some lawmakers may not be willing to leave that power to the White House or lose a stick that the minority party often uses to exert pressure, especially when it takes 60 votes to end a filibuster in the Senate.
Other officials have appended debt ceiling bills to the sweeping annual defense policy bill, which will be the last major bill to be passed by lawmakers in December.
However, it is unclear whether such a plan would succeed: raising the debt ceiling could jeopardize the Republican votes needed to counter the bloc of Liberal Democrats, who normally oppose the Defense Bill in protest at military spending. California Republican and minority leader Kevin McCarthy warned on Friday that such a maneuver could happen the whole package.
The non-partisan Policy Center said there was additional uncertainty about the debt ceiling this year due to the pandemic and the various economic aid programs still ongoing.
December 15 is a particularly important date as the Treasury Department has a $ 118 billion payment to the Highway Trust Fund. If corporate tax receipts due that day are weak, the Treasury Department could face a cash crisis and the United States may not be able to meet all of its obligations, such as paying social security and funding military cash checks.
The Congress Budget Office said this week that it expects the Treasury Department to run out of money by the end of December if Congress doesn’t act. However, the Treasury Department suggested that the Treasury Department might be able to defer some of the Highway Trust Fund payments required by the recently passed Infrastructure Act, potentially averting a default until sometime in January.
Along with its updated forecast, the bipartisan Policy Center has come up with a new proposal on how to deal with the debt ceiling, but it is unlikely to help lawmakers this time around.
The application, Established by Rep. Jodey C. Arrington, Republican from Texas and Scott Peters, Democrat of California, introduce a process that gives the president the power to suspend the debt limit for the following fiscal year pending a resolution in Congress Block move within 30 days. The president would then have to submit a debt reduction proposal to Congress that would be considered separately.
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