Biden Says 'Nuclear Option' to Raise Debt Ceiling 'Real Possibility' as Default Nightmare Looms

Ordinarily, a supermajority of 60 of 100 senators in the US Senate is required to pass important legislation. Republicans, entangled in a titanic clash with Democrats over a multi-trillion dollar spending package, have vowed not to support raising the debt ceiling, even as the Treasury warns of an impending default and global economic calamity.

President Joe Biden has hinted that Democrats may seek to remove the Senate’s filibuster rule to raise the debt ceiling.

“Oh I think that’s a real possibility,” Biden said, speaking to reporters on Tuesday night, when asked whether his party was looking at using a “nuclear option” amid the debt showdown.

“I’ll be on the phone till this is finished, and maybe meeting in person,” the president added, referring to his discussions with Democratic lawmakers on the issue.

Biden’s remarks come amid the rigid stalemate between Democrats and Republicans on the debt ceiling, with both parties refusing to budge on their position. The president’s party has rejected the idea of using reconciliation to deal with the issue – which might require them to make compromises on Biden’s signature $3.5 trillion budget bill featuring hundreds of billions of dollars in new social policy and environment-related spending.

The GOP has also refused to back down, with Senate Republican Leader Mitch McConnell penning an open letter to Biden Monday where he suggested that since the Democrats have chosen to “govern alone”, they would have to “handle the debt limit alone as well”.

My letter to President Biden this morning on congressional Democrats’ duty to handle the debt limit: pic.twitter.com/U3G9QMPJwY

— Leader McConnell (@LeaderMcConnell) October 4, 2021

McConnell and the Republicans have demanded that the Democrats engage in reconciliation to address the debt. Democrats, including Senator Tim Kaine have indicated that they won’t do so, calling the process “too complicated,” or time-consuming. Democratic Senator Sherrod Brown said it was “impossible” to start reconciliation now because there were “too many pitfalls,” since the resistance of even a single senator could drag the process out for weeks.

On Monday, Biden accused Republicans of “playing Russian roulette with the US economy.” McConnell shot back using the same expression, urging Democrats “not to play Russian roulette with the American economy.” Each side has warned the other of being labelled the “party of default” ahead of the 2022 midterm elections if the issue is not urgently dealt with.

The Democratic-controlled House of Representatives has already voted to suspend the debt ceiling until the end of 2022, leaving the matter entirely in the hands of the Senate.

Numbers Theoretically Add Up, But...

“Nuking” the filibuster would hypothetically allow Democrats to raise the debt ceiling using their 48 votes, plus the two independent senators who caucus with Democrats, Bernie Sanders of Vermont and Angus King of Maine. Republicans control 50 seats in the Senate. In the event of a 50/50 split, the vice president, in this case Kamala Harris, has the authority to cast the tie-breaking vote.

However, for the filibuster rule itself to be dropped, it would require bipartisan support, something Republicans and even some Democrats –like conservative Democrat Joe Manchin and Kyrsten Sinema, have proven loathe to do in recent months.

Yellin’ Yellen

The deadlock over the debt ceiling comes amid weeks of warnings from Treasury Secretary Janet Yellen that the United States may run out of money as soon as 18 October and default on its obligations to creditors.

In an interview with CNBC Tuesday, Yellen stressed she supported whatever maneuvers were necessary to deal with the debt limit issue. “It would be catastrophic to not pay the government’s bills, for us to be in a position where we lack the resources to pay the government’s bills. It really undermines confidence in the full faith and credit of the United States, our willingness to stand behind our debts, and [to] make sure that we pay them,” she warned.

Yellen also suggested that a first-in-history default by the US would be catastrophic as far as the dollar’s status as the de facto world reserve currency is concerned. “US Treasury securities have long been viewed as the safest asset on the planet. That partly accounts for the reserve status of the dollar. Placing that in question by failing to pay any of our bills that come due would really be a catastrophic outcome.”

Former President Donald Trump, whose four-year tenure in office saw US debt climb by about $7.8 trillion, with most of that accumulated on a bipartisan basis last year to in a series of Covid-related emergency spending bills, praised Republicans for their hardline negotiating stance. “You just look at what’s happening and there are a lot of bad scenarios,” he said Monday, referring to the prospects of a default or the passage of the Democrats’ budget agenda.

Calling the GOP position a “very, very powerful card,” Trump said he hoped the party “won’t have to play it, but I think they will in order to do something” amid Democratic intransigence.

The US national debt is rapidly approaching $29 trillion. When the concept of a debt ceiling was first implemented in 1917, the maximum borrowing rate was capped at $11.5 billion. The ceiling has been raised over 100 times since. Economists have warned that the prospect of the US defaulting on its debts could spark a massive global economic crisis.