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By Jason Lange
WASHINGTON (Reuters) – A bipartisan think tank warned on Friday that the US government would fail to pay its bills as soon as December 21 if Congress does not raise the debt limit as top Democrats and Republicans sought a way around a financial catastrophe. .
Bipartisan Policy Center projections, based on up-to-date official data on tax bills and government spending, highlight the growing pressure on President Joe Biden’s Democratic Party to find a way to legally limit the $ 28.9 trillion debt limit and its potential economic consequences to avoid. missed payments.
Congressional leaders including Senate Majority Leader Chuck Schumer and his Republican counterpart, Mitch McConnell, are considering linking the debt ceiling to the National Defense Authorization Act (NDAA), according to a person familiar with the matter.
It is expected that the bill will be passed for 60 years in a row, which has become law, despite the latest hurdles.
Leaders of both sides are examining whether adding a debt ceiling measure to the NDAA could help overcome the partisan inequalities that raised concerns about a potential failure earlier this year, the source said.
But Congressman Kevin McCarthy, a House Republican in the House of Representatives, dismissed the NDAA’s approach Friday as a democratic “exchange” aimed at failure.
“I don’t think it would be overcome,” McCarthy said at a news conference. “I think he’s going to fail. I really do.”
Congress passed legislation to fund the government until mid-February on Thursday, avoiding the risk of closing a partial government for the time being. But overcoming partisan debt can be a daunting task and can lead to much more serious risks.
“Congress would be flirting with financial catastrophe if it goes on holiday break without meeting the debt limit,” said Shai Akabas, director of economic policy at the Washington-based Bipartisan Policy Center.
If the upcoming tax bills are favorable, the center predicts the debt ceiling could be binding until Jan. 28.
On Tuesday, the nonpartisan Congressional Budget Office said the Treasury Department could start missing payments by the end of the month, and Treasury Secretary Janet Yellen said Washington could probably continue to pay all of its bills until Dec. 15.
When the Department of Finance reaches its debt limit, it will only have incoming tax receipts to pay bills. And since it borrows nearly 40 cents for every dollar it spends, the Treasury is missing out on payments owed to lenders, citizens, or both.
The shockwave would affect global financial markets. The cuts in domestic spending would push the U.S. economy into recession as the government loses payments from Social Security benefits to seniors to soldier salaries.
Biden Democrats have a small majority in both houses of Congress, but Republicans have vowed not to cooperate on the debt ceiling, which could hamper attempts to lift loan limits under common law rules.
In the Senate, Schumer called for a “bipartisan” solution that would require Republicans to cooperate, allowing the debt ceiling to reach a debt measure. Republicans have pointed out that Democrats are using a longer legal process known as “reconciliation” to raise the debt ceiling on their own.
Another issue is how to deal with the debt limit. Republicans want Democrats to raise the ceiling to a higher dollar, and then attack it in their 2022 congressional election announcements. Democrats want to avoid a certain amount of dollars by canceling the limit.
According to the source, the debate on the use of defense legislation is still in its infancy, and he said it was not clear how strong this approach would be among lawmakers on either side.
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