WASHINGTON — Congress is headed for a high-stakes showdown over the debt ceiling as the Treasury Department says the U.S. government will run out of money to pay its bills next month.
In a letter to congressional leaders Wednesday, Treasury Secretary Janet Yellen warned of a likely mid-October deadline to raise the debt ceiling. "The most likely outcome is that cash and extraordinary measures will be exhausted during the month of October," she wrote. She said that "waiting until the last minute" to tackle the issue could "cause serious harm to business and consumer confidence."
Lawmakers in both parties have repeatedly warned that failing to raise the debt limit would be catastrophic for the U.S. economy, but that hasn't stopped Republicans from trying to leverage concessions when a Democrat occupies the White House by withholding support.
House Speaker Nancy Pelosi, D-Calif., and Senate Minority Leader Mitch McConnell, R-Ky., are in the midst of a standoff about how to approach the issue.
McConnell wants Democrats to raise the debt limit without any Republican support — a position that will allow his members to avoid any political heat while allowing them to criticize the other side of the aisle.
But Pelosi told reporters Wednesday that House Democrats won't put a debt limit increase in the multitrillion-dollar social safety net package, which they expect to pass without Republican support.
One option Democrats are weighing is to attach a debt limit increase to the government funding bill, which must pass by Sept. 30 in order to prevent a government shutdown. Pelosi said the vehicle hasn't been decided.
"We'll have several options. We'll make them well-known to you as we narrow and go forward. But it has to happen," she said of extending the borrowing limit. "We won't be putting it in reconciliation. No."
But if Democrats don't lift the debt ceiling in the filibuster-proof budget, it would require at least 10 Senate Republicans to agree to raise the limit.
McConnell has said that because Democrats are proposing trillions in new spending, they should raise the borrowing limit on their own.
This week, a McConnell aide pointed to a speech last month in which he explained his position, which is backed by many Republican senators.
"Democrats have all the existing tools they need to raise the debt limit on a partisan basis," McConnell said Aug. 9 before the Senate left for recess. "If they want 50 lockstep Democratic votes to spend trillions and trillions more, they can find 50 Democratic votes to finance it."
McConnell said Democrats were behaving like a friend who is "flying to Las Vegas to blow all his money" and "wants you to co-sign a loan for him before he leaves."
The debt limit is a self-imposed obstacle the U.S. has created to meeting its obligations, which Congress routinely addresses. Lifting it would not authorize new spending or debt; it would simply enable the government to borrow money to pay the bills that Congress has accrued.
It would need to be raised whether or not Democrats passed their multitrillion-dollar package, in order to continue funding bipartisan government operations such as domestic and military spending.
Now, resolving the issue would require one party to blink in the standoff.
The debt limit tends to become a political football under Democratic presidents as Republicans criticize them over spending. Lifting it on a partisan basis could be a painful vote for some Democrats and subject them to GOP attack ads, which is why the party wants bipartisan buy-in.
Senate Majority Leader Chuck Schumer, D-N.Y., said it would be "the height of irresponsibility" for Republicans to "take the debt limit hostage," calling it "a horrible act and despicable act."
Pelosi said Democrats supported multiple increases in the debt limit under former President Donald Trump even though Republicans added to the debt by cutting taxes on a party-line basis.
"During the Trump administration, which amassed over $7 trillion in debt — that's what the debt ceiling lift is paying for ... we're paying the Trump credit card," Pelosi told reporters. "When President Trump was president, we Democrats supported lifting the debt ceiling because it's the responsible thing to do. I would hope that the Republicans would act in a similarly responsible way."
She said that "even the threat of not lifting it" can be harmful to the U.S. credit rating.
In 2011, after Republicans used the debt limit to extract concessions from then-President Barack Obama, McConnell told The Washington Post that most GOP members didn't think "the default issue was a hostage you might take a chance at shooting," but they learned it's "a hostage that’s worth ransoming."
McConnell spokesman Doug Andres responded on Twitter to Pelosi: "Democrats control Washington now. They can raise the debt limit on their own. This would be a crisis of their own making."