Joe Biden has condemned “reckless” Republicans for pushing the US government towards a historic debt default, warning: “A meteor is headed to crash into our economy.”
The president’s intervention came because there is a cap on how much money the federal government can borrow, which only Congress has the power to raise or lower.
The US treasury has said it will be unable to pay its bills by around 18 October, unless Congress raises the current debt limit of $28.4tn. Failure could trigger the first US default in modern history, wreaking havoc on the US and world economies.
In an era of bitter partisanship, the issue has become an acid test of Washington dysfunction. Senate Republicans have twice blocked action to raise the limit, arguing that Democrats can use a manoeuvre known as budget reconciliation to act alone.
“They won’t raise it even though defaulting on the debt would lead to a self-inflicted wound that takes our economy over a cliff,” Biden said in a televised address on Monday, noting that some of the debt was incurred by Donald Trump and is not related to his own spending plans.
“Not only are Republicans refusing to do their job,” he said, “they’re threatening to use their power to prevent us from doing our job: saving the economy from a catastrophic event. I think, quite frankly, it’s hypocritical, dangerous and disgraceful. Their obstruction and irresponsibility knows absolutely no bounds, especially as we’re clawing our way out of this pandemic.”
Historically, both parties have voted to raise the limit as matter of course. Democrats joined the Republican Senate majority in doing so three times under Trump.
Late last month, the House of Representatives sent to the Senate a bill to suspend the limit on treasury borrowing through the end of 2022. But Senate Republicans can use a procedure known as the filibuster, which means legislation must attract 60 votes, to prevent Democrats passing the measure.
Last week, the Senate parliamentarian reportedly ruled that the majority leader, Chuck Schumer, could use the reconciliation process to bring a debt limit bill to the Senate floor and pass it by a simple majority.
According to the parliamentarian, doing so would not jeopardise Democrats’ efforts to bring a second bill to the Senate floor under reconciliation. That is the multitrillion-dollar bill embracing Biden’s domestic agenda, expanding social services and addressing the climate crisis, that Democrats are now debating.
But Schumer has ruled out using reconciliation to lift the debt ceiling and Biden dismissed it as a “complex” and “cumbersome” process compared with the current bill before the Senate.
Biden said: “Democrats will meet our responsibility and obligations to this country. We’re not expecting Republicans to do their part. They made that clear from the beginning. We tried asking to no avail. We just ask them not to use procedural tricks to block us from doing the job that they won’t do.
“A meteor is headed to crash into our economy. Democrats are willing to do all the work stopping it. Republicans just have to let us do our job. Just get out of the way. You don’t want to help save the country? Get out of the way so you don’t destroy it.”
Moody’s, a financial analysis firm, has warned that a failure to act could cause a near-4% decline in economic activity, the loss of nearly 6m jobs, an unemployment rate of close to 9%, a stocks sell-off that could wipe out $15tn in household wealth and a rise in interest rates on mortgages, consumer loans and business debts. America’s credit rating would be downgraded.
Biden said: “Republicans say they will not do their part to avoid this needless calamity. So be it. But they need to stop playing Russian roulette with the US economy. It’s one thing to pay our debts already acquired. It’s another to require a supermajority to pay the debts already acquired. It’s not right. Let the Democrats vote to raise the debt ceiling this week, not obstruction or further delays.”
Senate Democrats are expected to hold a vote on a measure to raise the debt ceiling this week. Schumer has suggested the Senate will have to stay in session through the weekend and possibly into a planned recess next week if no progress is made.
He urged colleagues: “We must get a bill to the president’s desk dealing with the debt limit by the end of the week. Period. We do not have the luxury of waiting until 18 October, as it is our responsibility to reassure the world that the United States meets our obligations in a timely fashion and that the full faith and credit of the United States should never be in question.
“The consequences of even approaching the [deadline] date could be disastrous for our economy and devastating to American families.”
But Republicans continue to dig in, contending that since Democrats control the White House, House and Senate, the debt limit is their responsibility.
Mitch McConnell, the Senate minority leader, said in a letter to Biden: “Your lieutenants in Congress must understand that you do not want your unified Democratic government to sleepwalk toward an avoidable catastrophe when they have had nearly three months’ notice to do their job.”
Washington regards a debt default as unthinkable until suddenly it is not. A reporter asked Biden on Monday: “Can you guarantee that the US will not reach the debt ceiling? That that will not happen?”
Biden replied: “No, I can’t. That’s up to Mitch McConnell.
“I can’t believe that that will be the end result because the consequence is so dire. I don’t believe it. But can I guarantee it? If I could, I would, but I can’t.”