No recent fight in the halls of Congress has quite carried the same stakes as this one, coming at a time when Washington continues to grapple with rising coronavirus infections and the deadly consequences of a fast-warming planet. Biden himself has warned about the “catastrophic” effects of inaction with key deadlines looming.
With the clock ticking, the House took the first steps Tuesday to stave off the political and economic crisis, as Democrats voted to keep the government operational and suspend the debt ceiling into December 2022. The party-line outcome foreshadowed its doomed prospects in the Senate, where Republicans have pledged to oppose it, threatening to leave Congress with little time to resolve a set of disputes that could destabilize global markets.
“We cannot shut down the government. That would be catastrophic in its own right,” warned House Speaker Nancy Pelosi (D-Calif.) in a speech before the vote. “We cannot ignore and not support the full faith and credit of the United States of America.”
The first deadline arrives Sept. 30, at which point Congress must strike a deal to fund the government or critical federal services could cease Oct. 1. Millions of federal employees could see interruptions to their pay. Federal agencies that perform critical tasks in homeland security, law enforcement and housing could stop paying workers indefinitely. National parks and monuments also may close.
The implications of a shutdown on the government’s response to the pandemic are less clear, as there is little precedent for a sudden halt in government functions during a public health crisis. The U.S. government plays a leading role in monitoring the virus’s spread and coordinating vaccines and testing, all the while distributing billions of dollars in housing relief and other aid programs — working through agencies that are traditionally severely affected during a shutdown.
Three years ago, a shutdown under President Donald Trump’s watch also cleaved a hole in the U.S. economy: JPMorgan Chase estimated then that the country lost $1.5 billion each week that Washington remained at a standstill.
A shutdown in 2021, however, could have even greater economic effects at a time when the Biden administration is still grappling with a pandemic that at one point caused widespread, Depression-era unemployment. Adding to the burden, lawmakers had hoped in the latest funding measure to authorize billions of dollars to respond to two recent, deadly hurricanes that battered the Gulf Coast and Eastern Seaboard. Those dollars now remain in jeopardy, along with a third priority to help resettle Afghan refugees who left their home country as the Taliban seized on a messy U.S. withdrawal.
Only one Senate Republican, Sen. John Neely Kennedy (La.), has signaled an interest in breaking ranks and casting a vote in favor of the spending — citing the impact of Hurricane Ida on his home state.
“Having said that, I won’t vote yes happily,” he said. “I think this is a manufactured crisis.”
The next blow could come days later, in mid-October, when the U.S. government stands to breach the debt ceiling absent action from Congress. Treasury Secretary Janet L. Yellen and other top Biden administration officials have urgently referred to the prospect as a financial doomsday, saying it puts U.S. credit at risk and could plunge the economy back into the recession from which it only recently re-emerged.
The last prolonged standoff over government funding prompted Fitch Ratings, a credit agency, to warn at the time that it threatened the U.S. government’s rating, making its debts more expensive. The same possibility looms large once again, which could raise the cost of U.S. borrowing unless Democrats and Republicans take swift action.
The significant, looming repercussions only add to the urgency on Capitol Hill, which has less than two weeks until government funding runs dry — and a few weeks until the country breaches the debt limit. House Democrats on Tuesday unveiled the full text of their plan, which funds the government into early December and suspends the debt ceiling into December 2022.
But the proposal seemed ill-fated as Congress appeared at a complete standstill, with no serious negotiations underway and no effort on the part of the White House to break the logjam with the GOP. Instead, both sides have continued to trade rhetorical barbs, raising the prospects of financial calamity.
Pelosi and Senate Majority Leader Charles E. Schumer (D-N.Y.) have called on their GOP colleagues to acknowledge their “shared responsibility,” reminding them Monday that Democrats had supplied the votes to keep the country solvent even as they opposed other policies under Trump. A day later, Schumer took to the Senate floor to fault the GOP for hypocrisy, after the party added $7 trillion to the deficit while in power.
“This is playing with fire,” said Schumer, warning the combination of a government shutdown with a breached debt ceiling could have consequences including higher interest rates on Americans’ mortgages and delays in obtaining Social Security checks.
“Playing games with the debt ceiling is playing with fire and putting it on the back of the American people,” he said.
But Senate Minority Leader Mitch McConnell (R-Ky.) has ignored the attacks, as his party hopes to use the fight over the debt ceiling as a way to delay Democrats from securing as much as $3.5 trillion in new spending that Biden seeks. He said GOP lawmakers would have supported an extension of government funding along with new disaster relief if only Democrats had not coupled it with an increase in the federal borrowing limit.
Taking to the floor Tuesday, McConnell did not directly address the debt limit — but did fault the president and his Democratic allies in Congress for a “reckless taxing-and-spending spree.”
In recent days, Democratic lawmakers have reassured they will not allow the country to default. Some have said they could ultimately take special legislative maneuvers to bypass the Republican blockade and adopt the debt ceiling increase on their own.
But the process could take days that Democrats simply do not have, meaning at least a partial or short-term government shutdown is possible even if Congress staves off a more apocalyptic financial meltdown. And it would force Democrats to vote on their own to raise the debt ceiling by a specific amount, opening them to GOP attacks later — even as Democrats contend that some of the spending was enacted on a bipartisan basis.