Too big to fail: Congress members rush to prevent default and deadlock

On Tuesday, September 28, Secretary of the Treasury Janet Yellen warned Congress that the federal government will most likely run out of cash by October 18 unless the debt ceiling is raised.

If Republicans and Democrats refuse to cooperate and the gridlock remains past the deadline, then the government could have a debt default, a term which here means, “be unable to pay its bills.” Americans are already too familiar with government shutdowns, with the last one in 2018 and 2019 lasting over a month. Janet Yellen warns lawmakers that, just like last time, “It would be disastrous for the American economy, for global financial markets, and for millions of families and workers whose financial security would be jeopardized by delayed payments.”

Secretary Yellen also made it clear that this deadline could come sooner or later depending on the government’s spending habits. She said that “It is important to remember that estimates regarding how long our remaining extraordinary measures and cash may last can unpredictably shift forward or backward. This uncertainty underscores the critical importance of not waiting to raise or suspend the debt limit. The full faith and credit of the United States would be put at risk.”

Senate Democrats had originally proposed a bill that would approve a spending bill and raise the debt ceiling all in one fell swoop. Senate Republicans, however, did not want to suspend the debt limit at this time and filibustered to block it. Senate minority leader Mitch McConnell said that “There is no chance, no chance the Republican conference will go out of our way to help Democrats conserve their time and energy, so they can resume ramming through partisan socialism as fast as possible.” He later claimed that “[Passing the spending bill without Republican support] may be inconvenient for [the Democrats], but it is totally possible. This Democratic government must not manufacture an avoidable crisis.”

Back in August, one hundred House Republicans actually signed a statement saying that they would refuse to vote on any bill that raised the debt ceiling. This statement claimed that Democrats must “take responsibility for increasing the debt ceiling,” due to their increased spending, including the two trillion dollar COVID relief bill passed over the summer. Interestingly, the statement released by House Republicans places the blame for a shutdown and default squarely on the shoulders of the Democrats. “We should not default on our debts under any circumstances.” They said, “If Democrats threaten a default, it will only be because they refuse to vote for the debt ceiling increase necessitated by their own irresponsible spending.”

In fact, earlier in the year, McConnell did propose an alternative option to pass a government spending bill without raising the debt ceiling any more. Democrats, however, rejected this option.

Warren Buffett, a billionaire investor and philanthropist, believes that having a debt ceiling at all is a waste of time. If Congress fails to suspend it and ends up defaulting on their debt, he says that “It would probably be the most asinine act that Congress has ever performed. In fact, having a debt ceiling to start with is a mistake.” Buffett believes that a debt ceiling does nothing more than allow people to play politics with the livelihoods of others. The only time it gets brought up is during “periodic stalemate operations where everybody uses it for posturing purposes.”

As the deadline looms closer, Democrats are scrambling to find a way to prevent a debt default. Many Democratic lawmakers and voters alike have mentioned the so-called “nuclear option” from the Trump era. This path would allow Congress to establish a new precedent that would eliminate the filibuster altogether, allowing Senate Democrats to pass the spending bill. Doing this, however, would fundamentally change how our Senate works, and allow for bills to be pushed through at a much quicker pace. While Democrats may benefit from this for a few years, once Republicans gain the majority again, they could then use the precedent against them.

However, if disrupting the way that the Senate has worked for hundreds of years is what’s needed to keep the debt from defaulting and employees paid, then the nuclear option may be the only option left.