Dems’ fiscal endgame could require punting on debt limit

Disaster aid could be all the sweetener Democrats need to avert a government shutdown later this month — if they give up their biggest leverage in the high-stakes debt limit staredown.

In the next two weeks, President Joe Biden's party wants to fund federal agencies and fulfill his request for billions of dollars to help hurricane-battered states, all in one bipartisan funding bundle. But their best chance to make that work likely involves prolonging their biggest political gamble to date by leaving the debt limit to haunt them come October.

Droves of Senate Republicans this week reiterated that they remain against a bipartisan agreement to raise the nation's borrowing limit, even as the Treasury Department warns that a debt disaster could hit by mid-October. Even as that problem gets worse for Democrats, though, the urgency of disaster aid funding after Hurricane Ida slammed into red states across the Southeast is making it easier for them to win GOP votes to address the more pressing threat of a government shutdown on Oct. 1.

Top Democrats will soon have to settle a fiscal stumper: whether to tackle government funding separately from the debt limit, clearing one headache while almost certainly exacerbating another.

Sen. Susan Collins (R-Maine) said Tuesday that she “would certainly vote for” a government funding patch coupled with disaster aid.

Several other Republican senators said this week that they would consider joining Democrats in that vote: Sens. Bill Cassidy of Louisiana, Richard Shelby of Alabama, John Cornyn of Texas, Pat Toomey of Pennsylvania, Thom Tillis of North Carolina and Roger Wicker of Mississippi all said they would support — or won’t yet rule out — that option.

Sen. John Neely Kennedy is an unequivocal yes on disaster aid. And the Louisiana senator said he has already warned the White House that tying debt limit action to the spending package will tank the whole thing.

“I’m going to vote for it even if the debt ceiling is in it. But I’m telling you it’s not going to pass, and everybody knows that, including President Biden,” Kennedy said in an interview on Tuesday. He was one of four Republican senators to not add their name to a letter last month that vowed to oppose a future increase in the borrowing limit, even if tied to government funding.

“The president looked me in the eye and said, ‘We've got your back.’ And if he believes this is having our back, he's the only person in the Milky Way who believes that,” Kennedy added. “They know darn well that this [continuing resolution], with a debt ceiling increase on it, is not going to pass. So that tells me that they're not in good faith about helping my people."

Democratic leaders stress that no decisions have been made on attaching the debt limit to government funding while they weigh their options for dealing with the cap on the nation’s ability to borrow cash.

Some Democrats privately believe the party will end up passing a bipartisan continuing resolution that funds disaster aid and other presidential priorities, leaving the debt limit for another day. But first, they want to force the GOP to vote against a package that pairs government funding with a measure to avert debt default, seeing the potential for a messaging win.

“If we don’t get Republican support … they’re going to jeopardize the credit of the United States,” Sen. Ben Cardin (D-Md.) said of the GOP. “We have limited options. I’m all for dealing with it any way we can to get it done.”

Democrats have so far railed against Republicans for playing political chicken with the debt limit, which could cause economic chaos if breached. GOP leaders say they won’t cooperate on the issue while Democrats pursue trillions of dollars in social spending without Republican votes, however.

Wicker, whose state of Mississippi was also hit hard by Hurricane Ida, said a Democratic decision to separate the debt limit from government funding and disaster aid “would certainly remove one stumbling block.”

“It would absolutely depend on the terms of the continuing resolution, but it’s conceivable” that Republicans would support the stopgap with Biden’s requested cash for storm damage, he said.

Asked if he would support a standalone stopgap spending bill with disaster aid, Tillis said: “Yeah. Again, if it’s separate from the debt ceiling, we definitely have anticipated needs down in the Southeast as a result of the storm damage.”

Both parties have worked together in recent years to suspend the debt ceiling, most recently in August 2019, when the Trump administration and Congress agreed to suspend the limit for two years in a broader budget deal.

“Nobody — nobody — is allowed to hold our economy hostage,” said Senate Finance Chair Ron Wyden (D-Ore.). “We consistently assisted President Trump in ensuring that wasn’t the case, and that principle is still valid.”

Treasury Secretary Janet Yellen has warned of “irreparable damage to the U.S. economy” as soon as next month, especially if Congress waits until the last minute to deal with the debt limit. Other experts have estimated that lawmakers may have until mid-November to act.

That small window of extra time could fuel arguments in favor of funding the government now, while tackling a higher-stakes debt cliff later — although a bipartisan solution is far from guaranteed.

“I don’t believe we’ll be running out of money on Oct. 1,” said Shelby, the top Republican on the Senate’s spending panel. “It’s going to be a long fall, probably, and a cold, cold winter.”

Heather Caygle contributed to this report.