Senate Democrats debate retreat from debt ceiling standoff after GOP refuses to fold

Senate Democrats are quietly debating a strategic retreat from their standoff with Republicans on the debt ceiling, arguing the fight is not worth shutting down the government.

Democrats say allowing the government to shut down Thursday, the annual fiscal-year deadline for Congress to adopt a budget, is not reasonable given their party’s control of Washington and the ongoing coronavirus pandemic. 

Concern over the debt stalemate triggered a selloff on Wall Street on Tuesday, with stocks suffering their biggest losses in more than four months. The Dow Jones Industrial Average lost 569 points, or more than 1.6%, to close at 34,299 points. 

“Keeping the government open and preventing a default is vital to our country’s future,” said Senate Majority Leader Charles E. Schumer, a New York Democrat. “We’ll be taking further action to prevent this from happening this week.”

The realization came after a GOP filibuster killed legislation earlier this week to raise the debt ceiling and prevent a government shutdown.

“We thought we would get at least 3-4 Republicans cross over and vote to break the filibuster,” said a senior Democratic aide. “Instead, they all held firm and that drove the point home that [Senate Minority Leader Mitch] McConnell was not bluffing.”

Democrats now find themselves in the awkward position of having to figure out how to deal with the debt ceiling — and quickly.

Democratic leaders are debating whether to include the debt-ceiling hike within President Biden’s $3.5 trillion social welfare bill, which they hope to pass along party lines via budget reconciliation. The special procedure allows some tax and spending measures to avert the Senate’s 60-vote filibuster threshold and pass by a simple majority of 51-votes.

Democrats initially had refused to consider such a move because, under reconciliation rules, they would have to specify an exact number towards which to hike the nation’s borrowing limit. Such a number, which will be above the current limit of $28.8 trillion, opens vulnerable Democrats up to attack during next year’s midterm elections.

But given the mounting intraparty divisions that are preventing the $3.5 trillion package from moving forward, Democrats now believe they could use the threat of defaulting on U.S. debts to bring moderates to heel. 

Democratic leaders had attempted to force Republicans into voting for the debt-ceiling suspension by coupling it with short-term government funding and disaster aid.

Initially, the gambit looked as though it might work. Republicans, who had been burned by government shutdowns in the past, seemed wary of the prospect.

Some members of the GOP conference, most notably Sens. John Kennedy and Bill Cassidy of Louisiana, also did not want to vote against disaster aid, given the recent devastation caused by Hurricane Ida.

In the end, though, all 50 Senate Republicans stood together mainly because of Mr. McConnell, Kentucky Republican.

The GOP leader worked his conference hard, arguing that no one wanted to see the government shutdown, but that Democrats also now had the burden of governing. The latter point hit specifically hard because Democratic leaders are poised to ignore Republicans in passing the $3.5 trillion social welfare bill along party lines.

“If Democrats want to use fast-track, party-line procedures to ram through trillions more in inflationary socialism, they’ll have to use the same tools to handle the debt limit,” Mr. McConnell said.
GOP leadership also pledged publicly to support a “clean government funding bill,” including disaster aid, if Democrats committed to settling the debt ceiling on their own.

The argument was sufficient enough to bring Republicans like Mr. Kennedy along.

“Sen. McConnell’s legislation does everything except one thing, increasing the debt ceiling that Sen. Schumer can do in a matter of days on his own,” said Mr. Kennedy said. “Why are we fighting over this? You know, nature abhors a moron.”

Sign up for Daily Newsletters