Will Debt Limit Chickens Come Home to Roost?

Blog Post
Friday, October 01, 2021

Earlier this week, Treasury Secretary Janet Yellen sent her fourth letter to Congress, urging lawmakers “to protect the full faith and credit of the United States by acting [on the debt limit] as soon as possible.” This time, she also gave Congress a specific date: October 18. On this date, Yellen wrote, “we expect Treasury would be left with very limited resources that would be depleted quickly. It is uncertain whether we could continue to meet all the nation's commitments after that date.”

For months, Republicans and Democrats in Washington have engaged in a dangerous game of chicken over the debt limit. Democrats, led by Senator Chuck Schumer (D-NY), want to suspend the debt limit until after the 2022 elections, but they need Republicans to cooperate and not filibuster the measure. Republicans, led by Senator Mitch McConnell (R-KY), are irate over the Democrats’ $3.5 trillion Build Back Better bill and want to force Democrats to use reconciliation to raise the debt limit. Ironically, both scenarios would allow Democrats to resolve the debt limit impasse with 51 votes, but reconciliation would require Democrats to raise the debt limit by a specific amount (likely trillions of dollars) rather than merely suspend it. 

McConnell thinks he’s being clever, and he may well succeed, but the oddities of Senate procedure and the Law of Unintended Consequences suggest there is a non-zero chance that Democrats may choose a third option and “nuke” the filibuster to pass a debt limit suspension—not because they want to, but because they have to.

Suspending the debt limit until a date certain with general legislation is a quick and painless solution. Senator Schumer could go to the Senate floor tomorrow, legislation in hand, and ask unanimous consent to schedule a vote on final passage later that same day. By remaining silent and not objecting, Senate Republicans would allow the prescribed vote to happen but could still vote against the bill during the roll call vote. Unfortunately, there are at least two Republican Senators who have said they will object.

Under reconciliation there are many more hurdles, including the calendar. Because Democrats already have an FY 2022 budget resolution in place, they’d need to seek permission from the Senate Parliamentarian to revise it (to add reconciliation instructions to raise the debt limit)—a process that normally requires several meetings and oral arguments between opposing counsel. And even if Democrats are granted permission, they may be required to start the entire reconciliation process all over from scratch (draft, debate, and pass a new budget resolution in each chamber; then draft, debate, and pass a new reconciliation bill in each chamber). Each step would take multiple days and Congress has (at the most) until October 18—though in all likelihood, they probably have even less time because history suggests the financial markets could start to froth and panic ahead of the deadline.

If options 1 and 2 are not viable, Senate Democrats will have only one other option in the face of cataclysmic default: nuke the filibuster.

To be clear, Senate Democrats wouldn’t eliminate the filibuster entirely—the possibility of returning to the minority at some point would incentivize restraint. Rather, Democrats would likely re-interpret Rule XXII (the cloture rule) to exempt legislation addressing the statutory debt limit, leaving the filibuster in place for all other legislation (at least until it threatened other high profile cornerstones of our democracy; e.g. voting rights). 

Skeptics will point to establishment and moderate Democrats like Senators Dick Durbin (D-IL), Joe Manchin (D-WV), and Kristyn Sinema (D-AZ) to declare that Democrats don’t have the votes to eliminate the filibuster—and today they’d be right. But on October 17, “no” votes could quickly become “yes” votes to stave off default and the ensuing economic disaster it would cause.

Political history is littered with examples of unintended consequences. Senate Republicans should re-think their high-wire game of debt limit chicken lest it lead to an outcome they did not foresee and one that will change the fabric of the Senate, forever.