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The United States faces a default sometime between December 21 and January 28 if Congress does not act to raise or suspend the debt ceiling, a think tank in Washington warned Friday.
The projection from the think tank, the Bipartisan Policy Center, was a narrower window than it was last month, and the non-party political group suggested that the actual deadline, or X-date, may be towards the earlier end of this area.
Democrats and Republicans seem to have dampened the tone around raising the debt limit this time. While lawmakers have not decided on a way to lift the loan ceiling, they are exploring a number of ways to raise it, including some that could eventually give the White House more power to avoid the kind of conflicts that have routinely crippled Washington.
Republicans continue to insist publicly that Democrats must act alone to solve the problem, while Democrats have opposed that raising the loan ceiling is a shared responsibility given that both political parties have incurred large debts in recent years.
“Those who believe that the debt limit can be safely pushed to the back of the December legislation are misinformed,”[ads1]; said Shai Akabas, director of economic policy at the Bipartisan Policy Center. “Congress would flirt with financial disaster if it goes on holiday without addressing the debt limit.”
Treasury Secretary Janet L. Yellen warned lawmakers in November that the United States would not be able to pay its bills just after December 15. Testifying before the Senate Banking Committee this week, she stressed the urgency of the matter.
“I can not exaggerate how important it is for Congress to address this issue,” Yellen said. “America must pay its bills on time and in full. If we do not do that, we will remove our bowels now. “
In September, Yellen asked for the debt limit to be removed, explaining that it had become a destructive policy that posed unnecessary risks to the economy. After approaching the first default in US history, Congress in October raised the statutory debt limit by $ 480 billion, an amount the Treasury Department estimates would allow the government to continue borrowing through early December.
Congress leaders have quietly discussed ways to tackle the debt ceiling, after Republicans warned they would not help Democrats clear the 60-vote threshold for breaking a Republican filibuster against legislation to raise the borrowing ceiling.
Senators Chuck Schumer of New York, the majority leader, and Mitch McConnell of Kentucky, the minority leader, have spoken repeatedly in recent weeks about the problem, but have remained tight-lipped about a possible solution.
The debate has been further complicated by former President Donald J. Trump and his continued influence over the Republican Party. He has repeatedly insulted Mr. McConnell and the other Republican senators who supported a procedural vote in October that paved the way for Democrats to raise the debt limit.
But Mr. McConnell, while pushing for Democrats to raise the loan ceiling without help from his conference, promised this week that a standard would be avoided.
“Let me assure everyone that the government will not default, as it never did,” McConnell said Tuesday. The pressure continued, he added: “We have useful discussions about the way forward.”
Cut from both the $ 1.9 trillion coronavirus aid package passed in March and the $ 2.2 trillion climate, tax and spending plan that Democrats are trying to push through the Senate, Republicans have refused to help Democrats meet the debt incurred by both parts. They have taken that position even though leaders of both parties acknowledged the expenses that helped the debt balloon.
Democrats, for their part, have rejected a Republican demand to use a speedy process known as budget reconciliation to raise the debt limit without Republican votes. The Democrats used the process to adopt the coronavirus virus relief package, and they are using it again for the climate, tax and spending plan, but they have argued that Republicans should help ensure that the government does not default.
Aides to both parties, while warning that a solution has not been agreed, noted that party leaders had so far refrained from publicly blaming the problem.
As a way to navigate the dead end, some officials have discussed the possibility of leaving the authority to raise the debt limit to the administration, while giving Congress the opportunity to reject the decision by just a simple majority.
However, some lawmakers may be reluctant to hand over that power to the White House or lose a lump that is often used by the minority party to exert pressure, especially while 60 votes are needed to end a filibuster in the Senate.
Other officials have attached laws that raise the debt limit to the comprehensive annual defense policy bill, which is the latest major piece of legislation that lawmakers plan to approve in December.
But it is unclear whether such a plan will be successful: Attaching an increase in the debt ceiling could jeopardize Republican votes to counter the bloc of Liberal Democrats who generally oppose the Defense Act in protest of military spending. Representative Kevin McCarthy, the Republican in California and the minority leader, warned on Friday that such a maneuver could lead to a review of the entire package.
The bipartisan policy center said there was further uncertainty about the debt limit this year due to the pandemic and the various financial aid programs that are still ongoing.
December 15 is a particularly important date because the Treasury Department is required to pay $ 118 billion to the Highway Trust Fund. If corporate tax receipts due on that day become weak, the Treasury Department may face a cash squeeze and the United States may be unable to meet all of its obligations, such as paying social security and financing military pay slips.
The Congressional Budget Office said this week that it expected the Treasury Department to run out of cash by the end of December if Congress did not act. However, the Budget Office suggested that the Treasury might be able to defer some Highway Trust Fund payments required by the recently enacted Infrastructure Act, potentially averting a default until sometime in January.
Along with its updated forecast, the Bipartisan Policy Center unveiled a new proposal to deal with the debt limit, although it is unlikely to help lawmakers this time around.
Suggestion, introduced by Representatives Jodey C. Arrington, Republican from Texas, and Scott Peters, Democrat in California, will establish a process authorizing the President to suspend the debt limit through the following fiscal year as long as Congress does not pass a resolution blocking the move within 30 days. . The president must then offer a debt reduction proposal that Congress can consider separately.
