Washington Weekly: Debt Ceiling Chicken

U.S. Office of Public Policy, 01 October 2021

This Week:

The Senate approved various Biden administration nominations.  The House passed a bill to increase the debt ceiling (see below).  Both chambers passed a short-term government funding bill to prevent a government shutdown (see below). 

Next Week:

The Senate will have additional votes on the debt ceiling and Biden administration nominees.  The House will continue to seek to come to a consensus on the bipartisan infrastructure bill and the budget reconciliation bill (see below).  

The Leads

Very Muddled Policy Agenda.

This week could have led to the advancement of four very significant policy issues, but it wasn’t to be.  Three issues remain at an impasse, while the fourth was tackled on a bipartisan basis.  We address these issues below.

  • Debt Ceiling Chicken.  Both Republicans and Democrats continued to engage in brinksmanship on the need to raise the debt ceiling to avoid a catastrophic default.  While Democrats in the Senate this week removed the debt ceiling from the short-term government funding bill in order to pass that measure, they will continue to bring up the debt ceiling as a standalone measure in an effort to apply pressure on Senate Republicans to approve the extension on a bipartisan basis.  To pass the Senate, the debt ceiling would need to hurdle a 60-vote procedural requirement, which requires the assent of at least 10 Republicans.  Democrats will continue to pressure Republicans through debt ceiling votes over the next week or two, although they will also need to more seriously consider the back-up plan of passing a debt ceiling increase through budget reconciliation.  Treasury Secretary Janet Yellen indicated to Congress that it is unclear whether the government would have the funds needed to make debt and other required obligations beginning on October 18, though other analyses have suggested that there is greater room for maneuver.  Regardless, with time running out, one side will need to blink soon to get to a resolution.
  • Bipartisan Infrastructure Bill.  The Senate-passed bipartisan infrastructure bill was scheduled for a vote yesterday in the House, but House Speaker Nancy Pelosi (D-CA) had to pull the bill off the schedule late last night because there weren’t enough votes to pass it.  Progressives and moderates in the House Democratic caucus disagree on the timing of a vote on this bill.  Progressives continue to threaten to withhold their support of the infrastructure bill until the chamber votes on the much larger budget reconciliation bill.  While this is likely only a temporary setback for the infrastructure bill, it’s unclear exactly when a vote will be rescheduled.  Speaker Pelosi indicated that her goal is to have a vote in the next few days, but its timing more likely will need to coincide with a House vote on the budget reconciliation bill, which we believe is still weeks away.  We believe the infrastructure bill will ultimately pass but more intra-party drama will overshadow the issue for the next few weeks.     
  • Democrats’ Budget Reconciliation Bill.  The House had a very tentative plan to vote this week on a roughly $3.5 trillion social spending plan that also includes major tax increases, but this ambitious plan was quickly scrapped by Democratic leaders.  Moderate House Democrats only want to vote on a budget reconciliation plan that is likely to pass in the Senate.  Given that a few Senate Democrats remain uneasy about the size, scope and timing of the bill, it remains unclear what legislation can pass the Senate and when this could happen.  The budget reconciliation measure remains very much alive, but, given the positions of these Senators, changes will need to be made to the bill to shrink its size and scale.  The majority of the tax provisions that have been discussed over the last few weeks remain in play for inclusion in a final version of the bill.   
  • Averting a Government Shutdown.  Lawmakers in both chambers did make progress in one area by passing a bill to fund government agencies and operations beginning today, the start of the new fiscal year.  This action temporarily averted a government shutdown, which would have started today if the bill had not been passed.  The bill provides funds for the government until December 3 at levels equal to the prior fiscal year.  While this is good news, it amounts to a punt – Congress will have to craft a broader bill to fund government for the rest of the fiscal year by the December deadline.  The government funding bill to be written in two months will have to be bipartisan, and it likely will be on Congress’ list of challenges at that time.
  • Bottom Line.  Attempts at a resolution for the debt ceiling will dominate congressional action over the next two weeks.  The debate and rhetoric will be harsh and partisan over that period, but congressional leaders will have to get more serious and figure out a plan forward by mid-October.  We believe there will be a solution, but first the politics of the issue will need to play out over the next two weeks.  Budget reconciliation will be the top priority once a debt ceiling increase is finalized.  In the meantime, Democrats will work behind the scenes to address serious disagreements within the party on the size and scope of the big budget reconciliation bill.  They need to be completely united to get this bill over the finish line and are nowhere near that point as of today.  The fate of the bipartisan infrastructure bill seems inextricably tied to the budget reconciliation package.  The House is unlikely to vote on the former until there is an agreement on the latter.  This is our projection today, though these issues are subject to new dynamics every day that could change our thinking.      

Other Issues

Mental Health Agenda.  

Despite the stark partisan lines in Washington, a bipartisan group of 144 House lawmakers released a plan this week to broaden access to mental health care and address a growing drug crisis.  The plan is an amalgam of 66 different bills.  It focuses on broad efforts like drug prevention, treatment, and workforce development, while targeting assistance to rural and underserved communities and veterans.  The release of this mental health and addiction proposal comes as drug overdoses are at an all-time high.  Over 95,000 Americans died from drug overdoses in 2020, an increase of over 30% from 2019, according to the Centers for Disease Control and Prevention (CDC).  Perhaps most noteworthy, the CDC reported that half of all Americans reported struggling with mental health and substance use in 2020.  This bipartisan plan includes an expansion of Medicare coverage to include marriage and family therapists and mental health counselors, grant programs for law enforcement and corrections agencies to receive behavioral health crisis training and the establishment of programs to combat racial inequalities in mental health, among others.  The House proposal released this week shows that there is still a glimmer of bipartisan will among some lawmakers, especially on important social issues such as mental health and addiction.

The Last Word

Virginia Bellwether?  

With so much focus on next year’s mid-term elections, which could change the makeup of the House and Senate, it’s easy to overlook the significant elections to be held this year.  One in particular – the gubernatorial race in Virginia – merits special attention as a potential bellwether for the mid-term elections, which are still 13 months away.  Early voting began in the state this week in advance of the November 2 election date.  In most polls, former Virginia Governor Terry McAuliffe has a narrow lead on Republican Glenn Youngkin, a former private equity firm executive.  McAuliffe’s term as governor ended in 2018 in relatively good standing, and his re-election this year has been considered likely.  However, with President Biden’s national approval rating falling well under 50% over the last two months and with Democrats’ struggles in passing an ambitious national policy agenda, McAuliffe’s standing has also slipped a bit.  Biden beat Trump by seven points in Virginia in 2020, and either a razor-thin McAuliffe win or a Youngkin win in the Old Dominion State would be a big political development this year.