Kevin Dietsch/Getty Images
- Senate Republicans blocked a measure to avert a federal default and fund the government.
- It ensures that political brinksmanship will intensify over the debt ceiling, bringing the US closer to potential economic chaos.
- Democrats could lift the ceiling on their own, but there's no guarantee of success.
- See more stories on Insider's business page.
Senate Republicans led by Minority Leader Mitch McConnell blocked a measure on Monday evening that would have averted both a debt default and a government shutdown, bringing the US another step closer to a financial debacle as Republicans escalate efforts to derail President Joe Biden's domestic agenda.
All 50 GOP senators voted against the House-approved legislation that suspends the debt ceiling until December 2022 and funds the government through December 3, heightening the brinksmanship over the federal government's ability to pay its bills that has roiled Congress for months. The measure also included $28 billion disaster aid funding for communities ravaged by a recent pair of hurricanes, along with aid to resettle Afghan refugees in the US.
McConnell has insisted since June that Republicans will not sign onto a debt limit hike – or a hike of how much the US government can borrow – even as he said in September it was necessary to do so because "America must never default." Republicans contend Democrats can take unilateral action to raise the ceiling and finance their party-line spending this year from the stimulus law and a $3.5 trillion social spending package.
"There's no confusion about who runs this country, [Democrats] have both chambers," Republican Sen. Kevin Cramer of North Dakota told Insider last week. Republicans say they can support a stop-gap bill to fund the government past September 30, but only if it doesn't include a debt ceiling increase.
Democrats have assaulted the GOP's rationale for opposing lifting the debt cap, arguing that both parties are responsible for piling onto the federal debt with emergency spending during the pandemic and domestic spending increases under the Trump administration. Some Democratic lawmakers are proposing to get rid of the debt ceiling entirely.
The debt ceiling clash evokes a previous showdown between Republicans and the Obama administration in 2011 that caused turmoil in financial markets and led to a first-ever US credit downgrade. Now Republicans are voting against raising the debt ceiling in an effort to try to force Democrats to raise the debt ceiling on their own, even though Republicans voted to raise it three times under the Trump administration.
It's not immediately clear whether Democrats will push for a party-line debt ceiling increase using reconciliation, the same process they're employing to sidestep Republicans on their social spending plan. The tactic allows Democrats to pass their package with a simple majority vote.
But it could be a time-consuming endeavor stretching on for weeks with no guarantee Democrats can pull it off due to the strict guidelines governing reconciliation.
"We've never done one to create a debt limit spinoff, it's not like this is a well-understood concept," Charlie Ellsworth, a former Democratic Senate Budget Committee aide and now a partner at Pioneer Public Affairs, told Insider. "There's a lot of things that need to be worked out for that pathway to be pursued."
The consequences of a potential default could be immense and ripple throughout the American economy. The Bipartisan Policy Center projects the Treasury will run out of cash to meet the government's financial obligations sometime between Oct. 15 and Nov. 4.
After that, millions of seniors could face an abrupt halt in Social Security checks, and US soldiers could miss out on scheduled paychecks. The White House has warned of potential federal funding cuts for safety net programs like Medicaid.
This story will be updated.