Crisis averted but troubles loom
Key Takeaways
- Senate passed $480B increase in debt ceiling averting default, House returns on Tuesday to pass bill, Treasury estimates new deadline pushed until early December.
- To pass ceiling increase required 10 Republican votes to invoke cloture and stop the Republican filibuster. Leader McConnell led the effort, voted for cloture, but could only get 10 other Republicans to vote to avert default. McConnell said he will not intervene next time.
- Democrats continue to struggle with Build Back Better (BBB) Budget Reconciliation Bill funding President Biden’s agenda. Agreement that number needs to be lowered from $3.5T but dilemma is whether to keep all the programs but at lower levels or cut some programs while fully funding program that stay in legislation.
- Moderate Democrats have growing frustration with inability of leaders in House to pass Senate approved bipartisan $1T infrastructure bill. Speaker announced October 31 as new target date to pass bipartisan bill.
- December 3 shutdown threat needs to be addressed as Democrats will need Republican votes to pass funding bill (CR) and avoid a government shutdown.
How the Debt ceiling crisis was averted
Tuesday the House should approve the legislation passed by the Senate last week increasing the debt ceiling by $480T. Senator McConnell stepped forward last week and engineered a debt ceiling increase where 11 Republicans voted to end the Republican led filibuster and allow the 50 Democrats to vote to increase the ceiling.
Senator McConnell is one of the best vote counters and strongest persuaders in Washington, but the effort to get 10 of his Republican colleagues to stop the filibuster was more difficult than he had anticipated. The experience left a bad taste with McConnell and he wrote to Biden and Schumer that he will not provide Republican votes to help deal with the debt ceiling in December. Sometime in early December there will be an urgent need to either suspend or increase the debt ceiling in order to avoid a US Government default. At this point everyone knows a default is unacceptable but there is no plan in place to increase the ceiling. Next month the Treasury Department will again officially notify Congress of the new “drop dead” date on government financing.
Infrastructure and other things on our watchlist
While the debate on the debt ceiling was occurring, Democrats were talking behind the scenes on how to find consensus on their BBB Budget Reconciliation bill that started as a $3.5T package. It has become clear that Senators Manchin and Sinema are in a position to insist on a significantly lower number. Manchin has drawn a line at $1.5T while President Biden and others are beginning to talk about $1.8T to $2.5T. The focus of current talks is on a central question of how to reduce the $3.5T. Should Democrats fund all the programs in
the BBB but at lower levels, or should they take the most popular and important programs, drop others, but fund the remaining programs at levels closer to funding in the $3.5T bill? Talks will continue this week; Schumer and Pelosi have both expressed the hope that a deal can be found by October 31.
As I have written, Democrats need a win after seeing President Biden’s numbers fall with chaotic end of Afghan war, summer surge in Covid, and mess at the border – they need to change the subject and the bipartisan infrastructure bill is ready for a victory. Democratic moderates in the House had been promised a vote on the $1T traditional infrastructure bill on September 27, but Speaker Pelosi was forced to renege on her pledge when Democratic progressives in the House threatened to vote against, and defeat, the much needed bipartisan infrastructure proposal. The Speaker has said that the new goal for a vote in the House is October 31, but that date is clearly linked to resolving the Budget Reconciliation deadlock over spending levels; hence, it is not clear if infrastructure will have a vote on October 31.
There is a Governor’s race worth watching in Virginia this year. Virginia has drifted into the Democratic column in recent years with a Democratic Governor, two Democratic Senators, and Biden carried the state in 2020. But polls show the November 2nd Governor’s race a toss-up. The Democratic candidate, Terry McAuliffe, has been calling for the House to pass the traditional infrastructure bill. With the Northern Virginia suburbs being part of metro DC, voters there follow political news more than most. For Democrats unable to deliver on a basic commitment to roads, bridges, broadband and more could hurt McAuliffe and be a harbinger of Republican hopes to capture the House and Senate next year.
Finally, Congress avoided a government shutdown by passing a continuing resolution (CR) before the October 1 deadline. The new deadline is December 3. Unlike the debt ceiling, Republicans may be willing to provide the votes needed to keep the government open. Past polling has shown that Republican objections to funding the government has cost them votes; the question is likely to be about of what duration the next CR should be. However with the dysfunction we have seen in Congress this past year a government shutdown remains a possibility on December 3.
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