Democrats in Congress are struggling to find a way to US debt ceiling and avoid warning a chorus of executives and policymakers that it would be a ‘catastrophic’ standard in less than three weeks.
Republicans have repeatedly refused to support an increase in the country’s borrowing limit. The opposition party, led by Senate Minority Leader Mitch McConnell, on Tuesday closed a route that would have made this possible. Democrats to go it alone and raise the debt ceiling with a party voice in the upstairs room.
The deadlock means that Chuck Schumer, the Senate’s top Democrat, now has about 20 days to find a way to raise the debt ceiling before October 18, when Janet Yellen, the US Treasury Secretary, warned that The government Run out of money to meet its obligations to creditors.
“The only way Congress can ever do anything in this time and age is by getting very close to deadlines,” said Jim Manley, a former assistant to Democratic senators Harry Reid and Ted Kennedy.
He added: “So far we as a country have not suffered the economic consequences of such political games, but at some point someone will make a mistake and something will happen to the country.”
Investors are increasingly worried about the prospect of “stagflation” – high inflation and lower economic growth – with US stocks suffer their biggest loss since Tuesday in May.
Brian Gardner, a policy analyst at Stifel, said: ‘Investors should note that there is no clear path to tackling the debt ceiling. It could be a few weeks in Washington that could increase market volatility. “
Top Democrats seemed divided over the best way forward, and Schumer seems to be ruling out a complicated legislative maneuver known as budget reconciliation that would allow him to push the debt ceiling increase by the Senate by only democratic votes.
“Using the protracted and complicated reconciliation process is far too risky, far too risky,” Schumer said Tuesday.
But when asked about the use of the mechanism, Nancy Pelosi, the Democratic Speaker of the House of Representatives, told reporters: “We will see what our options are.”
With little room for error and a fast-approaching deadline, the U.S. venture began to sound the alarm. JPMorgan Chase CEO Jamie Dimon said on Tuesday that the bank had begun preparing for the “potentially catastrophic event” of a US credit standard.
“Every time it pops up, it’s corrected, but we should never get that close,” Dimon told Reuters news agency.
Morgan Stanley, another major U.S. lender, was also planning for the possibility of a U.S. credit standard, a bank spokesman said.
The Business Roundtable, one of Washington’s leading business groups, said on Tuesday that a failure to raise the debt ceiling posed an ‘unacceptable’ risk to the US economy.
The looming debt crisis has arrived at a time when democratic lawmakers and the White House are considering the possibility of a strike by the government later this week, as well as internal party warfare that runs the risk of raising President Joe Biden’s entire domestic legislative agenda.
The Democrats originally tried to pass a bill that would fund the federal government to raise the debt ceiling. However, the dual bill failed in the Senate on Monday night during a party vote amid Republican objections.
Despite raising the debt ceiling three times when Donald Trump was in the White House, Republicans now objects to lifting the loan limit and accuses Democrats of spending federal funds irresponsibly.
That puts Democrats under pressure to use another mechanism to keep the government funded and prevent a shutdown before a Friday at 12:01 p.m. Republicans have said they will sign a “clean” government funding bill if it does not include a provision to extend the loan limit.
At the same time, the Democrats on Capitol Hill are embroiled in separate negotiations aimed at biden Biden’s ambitious plans for a $ 1.2 ton two-party infrastructure package and a larger $ 3.5 tonne budget agreement who would invest unprecedented investments in social services.
Pelosi said the House would vote Thursday on the infrastructure bill – which the Senate has already approved – but dozens of progressive Democrats have threatened to torpedo the measure, insisting they vote against it unless they vote on the larger budget bill first.
Additional reporting by Eric Platt, Andrew Edgecliffe-Johnson and Joshua Franklin in New York, and James Politi in Washington
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