Forty-six Republican senators issued a stern warning to Democrats that they will not vote for an increase in the debt ceiling, a move that could raise the risk of the U.S. Treasury defaulting on its obligations as soon as next month.
“We will not vote to increase the debt ceiling, whether that increase comes through a stand-alone bill, a continuing resolution, or any other vehicle,” the letter, dated Aug. 10, said. “Democrats, at any time, have the power through reconciliation to unilaterally raise the debt ceiling, and they should not be allowed to pretend otherwise.”
The letter is the latest maneuver in a standoff between Republicans and Democrats over how to increase the federal government’s borrowing capacity to avert any payments default.
Every political impasse over addressing the ceiling in the past ended without such a catastrophic conclusion, although a protracted battle in 2011 did sow turmoil in markets and prompted a downgrade in the sovereign U.S. credit rating.
“I cannot believe that Republicans would let the country default. It has always been bipartisan to deal with the debt ceiling,” Senate Majority Leader Chuck Schumer told reporters Wednesday. “When Trump was president I believe the Democrats joined with him to raise it three times.”
For his part, President Joe Biden, asked by a reporter Wednesday at the White House whether he was worried about the debt ceiling, said “no.” He said of Congress, “They’re not going to let us default.”
Democrats declined to include language to raise the debt limit in a budget resolution adopted early Wednesday morning, meaning that the next opportunity to address the issue would likely be in a stopgap funding bill that needs to pass by Sept. 30 to avert a government shutdown.
Democrats have highlighted that much of the need to boost the debt ceiling owes to tax cuts enacted by Republicans in 2017, along with pandemic spending packages in 2020 that passed with bipartisan votes.
Raising the debt ceiling in a government-funding bill will require at least 10 GOP members to join with Democrats to agree to more forward by cutting off debate. Republicans say they can’t support the debt-limit increase because they oppose Democrats’ plans to spend up to $3.5 trillion on Biden’s economic agenda.
Only four Senate Republicans didn’t sign the letter -- Susan Collins of Maine, John Kennedy of Louisiana, Lisa Murkowski of Alaska, and Richard Shelby of Alabama.
Shelby is the top Republican on the Appropriations Committee, which oversees government spending. The other three Republicans not on the letter also sit on the panel.
Republicans have signaled all summer that they are unlikely to support a debt limit suspension or increase, a move they say would be tantamount to endorsing the trillions in social spending that Democrats are pushing.
It’s not yet known how quickly Congress needs to act to avoid a potential default, which would wreak havoc on financial markets and could trigger a downgrade of government credit.
The debt limit, or the total debt the Treasury can issue to the public and other government agencies, snapped back into effect on Aug. 1 when a two-year suspension expired. Treasury Secretary Janet Yellen has told lawmakers that Treasury could exhaust its special measures and run out of cash “soon after Congress returns from recess” in September.
The Congressional Budget Office projects that lawmakers likely have a wider window of time -- until October or November -- to raise or suspend the debt limit. The public debt outstanding is currently $28.6 trillion.
Bond market participants warned this month that, under some scenarios, Treasury may need to execute abrupt declines in issuance of bills -- a crucial component of financial markets.
The Senate has adjourned until Sept. 13, meaning the chamber will have little more than two weeks to address the issue before Sept. 30, when government funding expires. The House announced Tuesday it will return Aug. 23 to vote on the Senate-passed budget resolution, but no plans have been announced for addressing the debt ceiling.
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