Mitch McConnell proposes extension of short-term debt ceiling following pressure from Biden

Senate Minority Leader Mitch McConnell on Wednesday proposed a short-term suspension of the US debt ceiling to avert a national default and economic crisis until Democrats are able to adopt a more permanent solution before the end of the year.

“To protect the American people from a short-term crisis created by the Democrats, we will also allow the Democrats to use normal procedures to adopt an emergency extension of the debt limit to a fixed dollar amount to cover the costs. current spending levels through December, ”he said in December. a statement posted on Twitter.

“This will take away the Democrats’ apologies for the time crunch they have created and give the United Democratic government more than enough time to pass stand-alone debt limiting through reconciliation legislation,” added the Republican of Kentucky.

This development came as President Joe Biden and Democratic leaders in Congress stepped up pressure on Republicans to act on the debt limit.

McConnell’s interim offer would take some pressure off both sides to reach a compromise by Oct. 18, when the Treasury Department believes the United States will otherwise exhaust its emergency efforts to pay government bills.

McConnell reiterated on Wednesday that the GOP would also help Democrats speed up a reconciliation bill to lift the borrowing cap if Democratic leaders wanted to tackle the borrowing cap before the October deadline.

Most economists say a US default would spell economic calamity, and Treasury Secretary Janet Yellen warned Tuesday that she would “fully expect” a recession if it did. Biden echoed him on Wednesday, saying the default “would lead to self-inflicted injuries that could bring down the market, wipe out economies and cost jobs.”

Republicans and Democrats have clashed in recent weeks over how best to increase or suspend the federal borrowing limit and it was not immediately clear whether House Speaker Nancy Pelosi, D-Calif., Or the Senate Majority Leader Chuck Schumer, DN.Y., would be open to McConnell’s potential plan.

Representatives for Pelosi and Schumer did not immediately respond to CNBC’s request for comment.

McConnell and Schumer are expected to meet later Wednesday, according to Republican Senator from Texas John Cornyn, which could lead to greater clarity on a possible deal.

Over the past week, the White House has dramatically increased the pressure on Republicans in Congress.

On Monday, Biden said Republicans’ refusal to join Democrats in voting to suspend the debt ceiling was “hypocritical, dangerous and shameful,” especially after repeatedly voting during the former four-year tenure. President Donald Trump.

“Not only are Republicans refusing to do their jobs, they are threatening to use their power to keep us from doing our jobs – saving the economy from a catastrophic event,” Biden said.

Biden said much the same thing at a White House event with Fortune 50 CEOs on Wednesday, which focused on the dire consequences of a credit default.

The White House has yet to respond to McConnell’s offer and will likely defer to Schumer and Pelosi to formally accept or reject it.

While it’s unclear exactly how the Republican proposals came together, Biden said on Monday he plans to speak to McConnell in the next few days.

Biden and McConnell have a long-standing relationship of mutual respect built over decades in the Senate. During the Obama administration, Biden served as an informal liaison between the Obama White House and the Republican-controlled Senate.

If Democrats accept McConnell’s offer, the GOP leader will have effectively blunted the Democrats’ main line of attack: that Republicans stood in the way while Democrats worked to avoid a catastrophic default.

If they accepted the deal, Democrats would also pledge to increase – instead of suspending – the debt limit through a reconciliation bill. Suspensions allow the government to float new debt for a period of time instead of capping it at a certain dollar amount.

Politicians often prefer to suspend because it looks better before the election.

Democrats should probably raise the cap to a whopping $ 30 trillion or more. And while Republicans and Democrats are both responsible for the total debt, raising the limit leaves Democrats vulnerable to accusations of reckless debt-financed spending midway through 2022.

– CNBC’s Ylan Mui contributed reporting.