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Senate Majority Leader Chuck Schumer might be able to announce an agreement this week that will raise the federal borrowing limit and ensure the U.S. government avoids defaulting, according to analysts.
The expectations for a deal between the New York Democrat and Senate Minority Leader Mitch McConnell, the Kentucky Republican, come after a standoff over the debt ceiling in October. There have been signs that this month might provide smoother sailing on this issue.
“If Schumer and McConnell don’t see the upside in engaging in such brinkmanship this time around, then there are several paths to getting it raised relatively painlessly. That could include a punt-and-raise, where there’s another short-term increase via regular order followed by a longer-term increase via reconciliation,” said Ben Koltun, director of research at Beacon Policy Advisors, in a note on Monday.
“Another option is to use the National Defense Authorization Act (NDAA) to lay out an expedited process for Democrats to raise the debt ceiling via reconciliation. Our expectation is that Schumer will announce some bipartisan path on the debt ceiling this week.”
Budget reconciliation refers to a process for passing legislation through on a simple Senate majority with 51 votes.
From the archives (September 2021): What happens if the U.S. defaults on its debt?
And see: What will the Fed will do if the government hits the debt ceiling?
Ed Mills, Washington policy analyst at Raymond James, said although the defense
ITA,
bill stalled in the Senate last week, reports indicate a compromise bill from the House could break the impasse as soon as this week.
“A debt limit measure is also being eyed for potential inclusion in the NDAA,” Mills said in a note. “While chances are mixed for it to advance as part of the defense package, a combined bill would be another major breakthrough for the year-end agenda. This would leave Senate confirmations and the finalization of the BBB bill as the remaining items (assuming no other crisis emerges), which may play positively into the chances of BBB being finalized.”
BBB refers to President Joe Biden’s Build Back Better Act, a $2 trillion social-spending and climate package that Schumer aims to pass by Christmas.
Schumer last week promised his chamber will take action on raising the federal government’s borrowing limit by Dec. 15, which is the date when the Treasury Department has said it could be left with insufficient resources.
The Congressional Budget Office has estimated the Treasury would most likely run out of cash before the end of December if the debt ceiling isn’t raised, while the Bipartisan Policy Center has projected that the government is most likely to have insufficient cash to meet all its financial obligations sometime between Dec. 21 and Jan. 28.
“Budget experts think the Treasury can stumble through the next two weeks before there’s a genuine crisis, but waiting until after Christmas is now viewed as risky,” said Greg Valliere, chief U.S. policy strategist at AGF Investments, in a note.
“We continue to believe that Chuck Schumer will have to cave, with the Democrats embracing the reconciliation process to raise the ceiling. Could it be attached to the defense bill? Perhaps, but key leaders are lukewarm. In any event, we do not anticipate a U.S. default.”
Schumer told his fellow Democratic senators in a letter on Monday that they should prepare to work during the upcoming weekend.
“For this coming week, we anticipate processing nominations and a final conference agreement on NDAA. Due to the time it may take to process those items in the Senate without cooperation, Senators should prepare for potential weekend votes,” he wrote.
U.S. stock gauges
DJIA,
SPX,
traded higher Monday, as investors digested the latest news on the spread of the coronavirus and prepared for new inflation data later in the week.
