Senate leaders are working to finalize a deal to avoid the immediate threat of federal default by punting a political battle to December.
Democrats say they are willing to accept an offer from Senate Minority Leader Mitch McConnell, R-Ky., for a short-term lift of the debt limit. But they say they remain unwilling to accept a related demand to use McConnell's preferred procedure to pass a longer suspension of the borrowing cap.
Senate Budget Committee Chair Bernie Sanders, I-Vt., told reporters in the Capitol that Democrats want to avoid default and view the offer as a retreat by Republicans.
"They have finally done the right thing and at least we now have a couple of months in order to get another permanent solution," Sanders said, before adding, "There's not going to be reconciliation."
Democrats and Republicans have spent months entrenched in a battle over the exact process for addressing the borrowing limit despite the looming threat of a federal default. The fight has left the two sides badly divided over how to reach a long-term solution to the reality that they must address the limit in order for the government to continue making payments on debts that have already been incurred.
If they fail, credit rating agencies could downgrade the nation's standing. Such a move could cause serious harm to an already-shaky market, drive up borrowing rates for everyday people and do significant damage to investment funds, like 401(k) retirement plans.
The path forward hinges on a proposal from McConnell for Republicans to stand aside and allow Democrats to pass the short-term debt limit increase to a "fixed dollar amount" that would last until sometime in December.
"This will moot Democrats' excuses about the time crunch they created and give the unified Democratic government more than enough time to pass standalone debt limit legislation through reconciliation," McConnell said in a statement.
The potential for an agreement stalled progress on a planned vote on a bill to suspend the debt limit through December 2022. That bill, which was part of an an effort to pressure Republicans into a concession, remains a backup option.
The legislation already passed the House, but it needs 60 votes in the Senate to overcome a GOP filibuster.
The standoff has turned into a weeks-long drama that Senate Majority Leader Chuck Schumer, D-N.Y., has blamed entirely on McConnell.
"For months, Leader McConnell and Senate Republicans have insisted they want a solution to the debt ceiling, but only if Democrats do all the work by themselves," Schumer said in a speech on the Senate floor. "We've already presented Republicans with numerous opportunities to do what they say they want — including by offering a simple-majority vote so Democrats can suspend the debt ceiling on our own as Republicans have asked — but each time Republicans have chosen obstruction and kept us, unfortunately, on a path to default."
The default deadline is rapidly approaching, regardless of who is to blame for the current battle.
Treasury Secretary Janet Yellen has set a deadline of Oct. 18 for Congress to act, or the agency risks being unable to pay its bills. Yellen has warned that child tax credits, Social Security benefits and military paychecks are all in jeopardy if this political stalemate continues.
"Failing to increase the debt limit would have catastrophic economic consequences," the Treasury Department has said. "It would cause the government to default on its legal obligations – an unprecedented event in American history. That would precipitate another financial crisis and threaten the jobs and savings of everyday Americans — putting the United States right back in a deep economic hole, just as the country is recovering from the recent recession."
There were at least two options for Democrats to raise the debt ceiling with a simple-majority vote.
Budget reconciliation, which Senate Democrats are already planning to use to pass President Biden's "human infrastructure" priorities, is a process that allows lawmakers to pass a bill with a simple-majority vote.
McConnell has insisted it should be easy for Democrats to apply that process to the debt, no matter how long and complicated it could be.
Senate Democrats would first have to advance a budget resolution, undergo a vote-a-rama where additional Senate amendments are considered, wait while the House passes its own reconciliation passage, and then pass the legislation.
On Monday, Biden called reconciliation an "incredibly complicated, cumbersome process."
Schumer told reporters on Tuesday that he's not interested in using reconciliation, which he called a "drawn-out, convoluted and risky process."
The second option to move forward with a simple-majority vote? Getting rid of the legislative filibuster. But this path is also a rocky one, with at least two Democratic senators — Joe Manchin of West Virginia and Kyrsten Sinema of Arizona — vehemently opposed to doing away with the filibuster.
While there have been conversations about a "carve-out" of the filibuster rule for the debt ceiling, the reality is that once the filibuster is busted, it's busted.
It harks back to when the filibuster was previously eliminated for judicial nominees, an action that ultimately led to the filibuster's elimination for Supreme Court nominees.