GOP plan to block House measure could trigger an unprecedented $28tn default

Opposition from Mitch McConnell means the spending package is dead and the US faces a shutdown and default

Top Republicans in the Senate are poised to block a key spending package advanced by Democrats in a move that could precipitate the dual fiscal crises of a government shutdown and an unprecedented US default on its colossal debt obligations.

The House has approved a combined stopgap funding measure that would keep the federal government open until early December and suspend the debt limit until after the 2022 midterm elections, sending the legislation to the Senate.

But the Senate minority leader Mitch McConnell swiftly announced that Republicans would sink the measure with a filibuster and prevent it from receiving the 60 votes needed to pass – causing a government shutdown on 1 October and a default weeks later.

The opposition from McConnell means the Democrats’ proposal is dead on arrival. And with no serious discussions to resolve the high-stakes showdown in sight, the US now faces the prospect of a shutdown government defaulting on $28tn of debt.

At issue are the consequences of an unprecedented default on federal debt, which could plunge the economy into an immediate recession, trigger a meltdown in global financial markets and lead to the downgrading of America’s credit rating. Economists say a prolonged impasse could cost the US economy millions of jobs, wipe out trillions in household debt and send unemployment rates surging.

The debt limit corresponds to the amount the US government can borrow to pay its bills. Most recently, Democrats joined Republicans to suspend it until the end of July, after which the Treasury Department has used emergency measures to finance obligations.

The US has previously avoided defaults at the last minute but with Republicans entrenched in their refusal to tackle the debt limit problem in bipartisan fashion, the latest standoff is likely to come down to the wire, said sources familiar with the matter.

Treasury secretary Janet Yellen reiterated the urgency of the situation in a recent letter to Congress, warning that the US was on track to default in mid-October and cause “irreparable harm” to the economy if Congress failed to take action.

Alarmed at the deteriorating nature of discussions in the House and Senate, Yellen also held private discussions this month with McConnell and former Republican Treasury secretaries Steven Mnuchin and Henry Paulson, though those did not resolve the impasse.

Democrats have long insisted that Republicans tackle both the government shutdown issue and the debt limit issue through a bipartisan vote, arguing that they joined Republicans in raising the debt ceiling when Donald Trump was president.

The House speaker, Nancy Pelosi, and the Senate majority leader, Chuck Schumer, have also reiterated in recent days that it was mainly because of Republicans that the national debt increased by roughly $8tn during the previous administration.

Pelosi said in a recent news conference that the need to suspend the debt limit stemmed in part because of tax cuts to the wealthy enacted during Trump’s time as president. “We’re paying the credit card, the Trump credit card,” Pelosi told reporters.

But the Democrats’ plan to pair the stopgap spending bill with the debt limit suspension – and dare Republicans to block it – has now run headlong into Republican resistance led by McConnell that shows no sign of reversing course.

McConnell has suggested for weeks that Democrats instead include the debt limit language in the $3.5tn infrastructure package that Schumer plans to pass with a fast-track procedure known as reconciliation that requires only a party-line vote.

But House budget committee chairman John Yarmuth dismissed the proposal as unworkable on Wednesday, saying that his staff had determined that it was “virtually impossible” to tackle the debt limit through the infrastructure package or even as a standalone bill.

The difficulty, according to sources familiar with the procedure, is that including the debt limit in the $3.5tn infrastructure package would require Democrats to return the bill to the House and Senate budget committees and then schedule votes in both chambers.

Yarmuth told reporters there would not be enough time to re-run the entire process before the looming end-of-month deadline – meaning that without a reversal by Republicans, the US could drop off the proverbial fiscal cliff.

“We could start the process over with a separate budget-reconciliation bill that is devoted to just raising the debt limit – the law allows us to do that,” Yarmuth said. But he warned: “That’s a matter of weeks. So, you’re up against a potential deadline.”

Democrats could still move to advance a ‘clean’ stopgap funding bill devoid of language to suspend the debt limit, which Republicans have privately suggested they would not filibuster, and take action on the debt limit in a subsequent standalone bill.

But even though such a measure would avert the immediate calamity of a government shutdown on 1 October, it would still leave Congress with no path to lift the debt limit after Republican senator Ted Cruz confirmed he would block a standalone bill.

Justin Goodman, a spokesperson for Schumer, criticized McConnell for refusing to join Democrats for what has in years past been regarded as a routine step that allows the US treasury to meet its debt obligations.

“Every American will know that Senate Republicans are to blame,” Goodman said.


Hugo Lowell in Washington DC

The GuardianTramp

Related Content

Article image
House passes Biden’s $1.75tn Build Back Better plan after months of negotiations – as it happened
House predictably voted mostly along party lines for the legislation, which focuses on programs ranging from education to healthcare

Vivian Ho now and Joanna Walters earlier

19, Nov, 2021 @10:09 PM

Article image
Democrats block 'empty' Republican police reform bill
Democrats say Republican bill is a toothless response to police brutality and are backing rival bill expected to pass the House this week

Joan E Greve in Washington and agencies

24, Jun, 2020 @8:38 PM

US House avoids debt default in passing bill - video

The Republican-dominated House of Representatives passes a bill to stop the US defaulting on its debt, with only Democrat support

17, Oct, 2013 @6:25 AM

Article image
House panel demands White House turn over Kushner documents – as it happened
White House given deadline of Monday to comply with committee’s request after reports Trump ordered security clearance for Kushner

Gabrielle Canon in Oakland (now) and Sabrina Siddiqui and Adam Gabbatt in Washington (earlier)

02, Mar, 2019 @1:25 AM

Article image
Senate Democrats pledge to block Neil Gorsuch's supreme court nomination
Senate minority leader Chuck Schumer joins Bob Casey and independent Bernie Sanders in opposition, setting stage for clash over potential filibuster

David Smith in Washington

23, Mar, 2017 @5:41 PM

Article image
Biden mulls options in case Republicans try to block cabinet picks
Transition team plans for possibility that Senate Republicans – depending on Georgia runoff contests – may aim to stonewall

Daniel Strauss in Washington

07, Dec, 2020 @8:45 AM

Article image
Impeachment: GOP leaders reportedly say they lack votes to block witnesses – as it happened
Maine senator says ‘there’s some gaps that need to be cleared up’ while White House counsel encourages senators to ‘end the era of impeachment for good’

Maanvi Singh in San Francisco (now) and Joan E Greve in Washington (earlier)

29, Jan, 2020 @1:07 AM

Article image
Trump impeachment inquiry: House judiciary committee releases report
Nadler says constitutional situation is ‘Framers’ worst nightmare’ as Trump derides ‘witch-hunt’ and boasts about US economy

Martin Pengelly in New York

07, Dec, 2019 @9:09 PM

Article image
President Obama's final White House Correspondents' dinner – as it happened
It’s Obama’s final turn as comedian-in-chief, joined by comedian Larry Wilmore

Megan Carpentier

01, May, 2016 @3:49 AM

Article image
Trump claims plan to end longest government shutdown in history
Trump softens threat to declare emergency but wall standoff hits workers’ pay and key services

Martin Pengelly and Jamiles Lartey in New York

12, Jan, 2019 @5:02 PM