Congress faces flurry of economic deadlines before the year ends

Economist calls debt ceiling battle ‘political theater’ as deadline looms

Former White House Chief Economist Joseph Lavorgna and BNY Mellon Wealth Management Head of Equities Alicia Levine discuss the debt ceiling battle, jobs added in September and the impact of minimum wage.

Congress is gearing up for a hectic December, facing a flurry of must-pass spending bills and economic deadlines that could have catastrophic consequences if lawmakers miss them.

Lawmakers must address dueling deadlines on the debt ceiling and government funding, on top of President Biden's nearly $4 trillion economic agenda that Democrats are hoping to pass by year's end.

Top Senate Democrats and Republicans announced last week they had reached an agreement to raise the debt ceiling before an Oct. 18 deadline and avert a first-ever default – which Treasury Secretary Janet Yellen had warned could trigger an unprecedented financial crisis in the U.S. 

The deal will boost the legal debt cap by $480 billion, which the Treasury Department estimates would be enough to allow the government to continue borrowing through Dec. 3. The current limit is around $28.4 trillion and would be permitted to rise to $28.8 trillion. The new date, however, coincides with the expiration of federal government funding on Dec. 3, meaning lawmakers will likely need to reach a multi-pronged accord on both issues.

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Here's a closer look at the chaotic schedule ahead for lawmakers on Capitol Hill:  

Debt limit 

Lawmakers reached a deal last week on a short-term debt ceiling increase allowing the U.S. government to pay its bills until Dec. 3.

But the agreement did nothing to resolve the broader stalemate between Democrats and Republicans over the debt and likely sets up another showdown for the end of the year. 

For months, GOP lawmakers refused to budge from their insistence that Democrats act alone to suspend or raise the debt ceiling through the budget reconciliation process, allowing them to bypass a 60-vote filibuster in the Senate. But Democrats were adamant about not going it alone and argued there was not enough time to use reconciliation, with the U.S. careening toward its first-ever default as soon as Oct. 18.  

U.S. House Speaker Nancy Pelosi, a Democrat from California, speaks with Senate Majority Leader Chuck Schumer, a Democrat from New York, following a bill enrollment ceremony for the Covid-19 Hate Crimes Act at the U.S. Capitol in Washington, D.C., U. (Samuel Corum/Bloomberg via Getty Images / Getty Images)

Despite last week's deal, Senate Minority Leader Mitch McConnell has not dropped his demand that Democrats ultimately use reconciliation to raise the ceiling beyond December – and warned he would not help increase the debt limit again. 

"I will not be a party to any future effort to mitigate the consequences of Democratic mismanagement," McConnell wrote in a scathing letter addressed to Biden. "Your lieutenants on Capitol Hill now have the time they claimed they lacked to address the debt ceiling."

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If the U.S. failed to raise or suspend the debt limit, it would eventually have to temporarily default on some of its obligations, which could have serious and negative economic implications. Interest rates would likely spike, and demand for Treasurys would drop; even the threat of default can cause borrowing costs to increase.

"The U.S. has always paid its bills on time," Yellen wrote a recent Wall Street Journal op-ed. "But the overwhelming consensus among economists and Treasury officials of both parties is that failing to raise the debt limit would produce widespread economic catastrophe."

Government shutdown 

Congress avoided a last-minute government shutdown at the end of September by passing a short-term spending bill to keep the government funded until Dec. 3. But that means lawmakers have just about two months to figure out how to keep the government open before the stopgap bill expires in early December. 

"Fortunately, we have already passed a CR until Dec. 3 to keep the government open until we pass the full appropriations bill," House Speaker Nancy Pelosi wrote in a letter to Democratic colleagues.

But the matter is still rife with conflict: Democrats are feuding with Republicans, who want bigger spending increases for defense and smaller increases for domestic spending programs.

Biden’s economic agenda 

In addition to trying to prevent a devastating fiscal cliff, Democrats are also aiming to pass Biden's multi-pronged economic plan: A $1 trillion, bipartisan infrastructure bill and a $3.5 trillion family and climate plan that would dramatically expand the government-funded safety net. 

Party infighting, however, is threatening to derail both pieces of marquee legislation: Moderate and progressive lawmakers are jockeying for control in a narrowly divided Congress, feuding over the size and scope of the larger spending bill. Centrists are pushing to pass the Senate-approved infrastructure bill first, while left-wing Democrats insist they'll sink the measure unless the upper chamber first approves a more expansive spending proposal. 

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Moderates have also voiced skepticism about another multitrillion-dollar bill – funded by a slew of new taxes on wealthy Americans and corporations – after the coronavirus pandemic pushed the U.S. deficit to a record high. 

Biden has intervened to personally attempt to head off the brewing intraparty war between moderates and progressives and has held several meetings with Sens. Kyrsten Sinema, D-Ariz., and Joe Manchin, D-W.Va. According to Politico, the White House is seriously entertaining making major cuts to the reconciliation bill, with an expected range of roughly $1.9 trillion to $2.3 trillion. 

Democrats have just a few legislative weeks to negotiate and pass a spending bill in both chambers in addition to the infrastructure bill that Biden views as critical to his campaign pledge to work across the aisle. But the party will also be juggling the threat of two impending crises: a government shutdown and debt default. 

"Every day brings us closer to passing both the Build Back Better Act and the Bipartisan Infrastructure Bill, as we work to keep the government open and lift the debt ceiling," Pelosi wrote in her recent letter to Democrats.

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