The US has reached its debt ceiling. what happens next? Congressional action on the debt ceiling will increasingly wait until the Treasury Department runs out of its special measures - Liberty

Saturday, October 28, 2023

The US has reached its debt ceiling. what happens next? Congressional action on the debt ceiling will increasingly wait until the Treasury Department runs out of its special measures


Congressional action on the debt ceiling will increasingly wait until the Treasury Department runs out of its special measures. Kenny Halston

The U.S. hit its borrowing limit this week, forcing the Treasury Department to launch so-called special measures to ensure the country has enough cash to meet its financial obligations.

Treasury Secretary Janet L. Yellen told lawmakers that these measures would allow the United States to continue paying military salaries, retirement benefits, and interest to bondholders through at least early June.

But the launch of these extraordinary measures is just the first step in a series of moves by the Treasury Department to avoid a US debt default. Ultimately, it is up to Congress to decide whether to allow the country to borrow more money or default by not paying interest and other payments to investors who expect it.

The fate of the U.S. economy, which could face a financial crisis and plunge into a deep recession, is at stake if Congress cannot reach a deal.

One of her pressing issues is when the United States will reach her so-called X date. This is where the government can no longer find creative ways to get below her $31.4 trillion debt ceiling and will have to borrow more money or default on payments. that invoice.

Another big question for her is whether Congress will agree to raise the borrowing limit.

So far, House Republicans have made it clear they oppose raising the debt ceiling without spending cuts. This could result in a protracted battle to avoid a US debt default.

Here are some key moments to expect over the next few months.

Spring Budget War

The White House is set to release an annual budget proposal outlining Biden's spending priorities in early March.

Extension of temporary measures

In a letter to Congress on Thursday, Yellen said she will begin a "debt suspension period" that will last until June 5. As a result, the Treasury will no longer invest funds in specific federal health care and retirement programs.

Yellen will likely send additional letters to lawmakers with an update on the time these extraordinary measures can give her.

This includes suspending the routine reinvestment of securities held by the Treasury's Exchange Stabilization Fund, buying and selling currencies, suspending loans to foreign governments, or suspending funding between agencies and departments. increase. This may involve temporarily moving funds to make payments on the due date.

Role of Parliament

Congressional action on the debt ceiling will increasingly have to wait until the Treasury Department is about to run out of its special measures.

In 2021, the last time the federal government hit the debt ceiling, Republicans and Democrats in the Senate agreed to a short-term extension to the borrowing ceiling two weeks before it defaulted. Warned of possible violations, Congress finally approved measures to raise the debt ceiling to $2.5 trillion.

Such trades face more formidable odds this time around.

California House Speaker Kevin McCarthy called on the Biden administration and Democrats in Congress to negotiate spending cuts to gain Republican support in the House for raising the debt ceiling.

Democrats, including majority leader Sen. Chuck Schumer of New York, have so far rejected the possibility of negotiations.

But Democrats may oppose raising the debt ceiling without addressing the budget deficit. West Virginia's third-generation senator Joe He Manchin has expressed his support for cutting some spending as Congress considers raising the debt ceiling.

Congressional Workaround

Officials and aides have raised the possibility of using a procedural tool known as a petition for immunity in the House of Representatives as Congress plots a possible means of resolving the debt ceiling stalemate.

But while the mechanism "can be used to address a variety of bottlenecks in the legislative process," Molly Reynolds, a senior fellow in governance studies at the Brookings Institution, said it was "not a particularly sophisticated strategy." Stated. said. Said. I warn you.

The process is politically tricky given that it undermines the House Speaker's powers and procedural control of the floor. Lawmakers must decide on a bill that secures 60 votes in the Senate with sufficient Republican and Democrat support and then introduce that bill to the committee.

A member of Congress must introduce the bill to the committee within 30 days while the House is in session. Depending on Maison's schedule, this period may span several months. Lawmakers then have to collect her 218 public signatures on the petition. That means that every Democrat who openly opposes their leader should be joined by at least a handful of Republicans.

Once those signatures are collected, lawmakers will have to wait another seven days until legislation day before declaring their intention to take the bill to the House for a vote. In that formal notice, the Chair should, in principle, be scheduled to speak within her two days of the legislative period.

But the long-running process and political ramifications of Republicans forging a public alliance with Democrats in opposition to a Congressional majority have made it difficult to use Congressional tools to avoid a default. I am here. It's far from it.

Since the House voted to reopen the Federal Export-Import Bank in 2015, it has been underutilized, and Republicans who joined Democrats to support the bill resigned shortly before House Speaker John. The threat of momentum behind it has often proven sufficient to pressure party leaders to vote on bills they would otherwise not consider.