Senate passes short-term debt ceiling extension

Senate Majority Leader Chuck Schumer said a vote on a short-term agreement to speed up passage of the debt ceiling increase deal will take place tonight.

At 7:30 p.m. ET tonight, the Senate will vote to break a filibuster on the agreement to raise the debt ceiling through early December, which needs 60 votes to succeed.

Following that vote, the Senate is expected to vote on final passage (likely around 8:15 p.m. ET), which only requires a simple majority. 

If the Senate approves the debt limit extension, the House will next have to approve it before it can be sent to President Biden for his signature.

Some background: The deal between Minority Leader Mitch McConnell and Majority Leader Chuck Schumer, which Schumer announced on the floor earlier today, is to increase the debt ceiling by $480 billion, an aide familiar with the negotiations tells CNN.

That is how much the Treasury Department told Congress it would need to get to Dec. 3, according to the aide.  

Republican leaders are struggling to convince 10 Republicans to vote to advance a short-term increase of the debt ceiling, a bind they’re in after months of saying Democrats would have to raise it on their own. 

GOP senators emerged from a closed-door conference meeting in the US Capitol refusing to commit to vote for the debt ceiling with some opposed to the deal Senate Minority Leader Mitch McConnell cut with Democrats and many saying they were undecided. 

In the closed-door lunch, GOP leaders tried to convince all their members to forgo a procedural vote on the measure – something that would require 10 Republicans to join all 50 Democrats for it to advance – and instead consent to move directly to a final vote on the measure when it could pass on a majority vote with just Democratic votes.

Sen. John Cornyn, a Republican of Texas, said the issue remains “unresolved” and that the leaders are continuing their “due diligence” to win over those members and that work will continue this afternoon. 

Sen. Mike Rounds, a Republican of South Dakota, said GOP senators may huddle again later Thursday to try to resolve their differences.

Cornyn acknowledged their members are so unhappy with having to vote to advance the debt limit – something McConnell had said repeatedly the Democrats would do on their own — there is a possibility that Republicans could not provide the needed 10 votes.

“That’s one possibility, which is not good,” said Cornyn who would not commit to voting to advance it himself.  

Sen. Ron Johnson speaks with reporters at the U.S. Capitol on Thursday, October 7.

Sen. Ron Johnson, a Republican of Wisconsin, said he would vote against the debt ceiling increase but said he prefers just to let the Democrats vote on their own. 

“I’m not going to facilitate this. I’m not going to object. I hope no Republicans object. Just let the Democrats do what they have to do,” Johnson said.

More details on the GOP meeting: In the lunch, according to senators who attended, McConnell told his caucus members that passing the increase was important to prevent a default and that the deal they struck for a short-term extension would require Democrats to pass a long-term extension on their own in December using budget reconciliation. 

The deal also requires Democrats to vote for a specific value of the debt ceiling, not just a suspension, a key demand of Republicans, McConnell told his members.

As he left the meeting, McConnell said, “I certainly hope not,” when asked by a reporter if the Senate would likely be in session Saturday to process the bill. 

McConnell declined to respond when asked if the GOP could muster the 10 votes if necessary.

Retiring Sen. Richard Shelby of Alabama, the top GOP appropriator, said he would vote “to keep the government going” and that he expected other GOP leaders to vote for it as well. 

CNN’s Jeremy Diamond asked President Biden if he’ll support a short-term debt ceiling deal upon arrival at Chicago’s O’Hare International Airport—Biden crossed his fingers and said he was waiting to see if the deal is finalized.

Pressed on if he’d sign the bill into law, Biden shouted, “I’m not sure of that yet,” before boarding his car.

Speaking to reporters before landing in Chicago, White House principal deputy press secretary Karine Jean-Pierre called the deal “a positive step forward.”

White House Principal deputy press secretary Karine Jean-Pierre told reporters on board Air Force One Thursday that the Senate deal to extend the debt limit through early December is “a positive step forward.” 

Jean-Pierre said today’s deal “gives us some breathing room for the catastrophic default we were approaching.”

“We’ve been in close contact with Leader Schumer’s team and will remain so as the bill moves forward and gets to the president’s desk,” she added. 

CNN’s Jeremy Diamond, traveling with the President to Chicago Thursday, pointed to comments from White House press secretary Jen Psaki yesterday, who told reporters a temporary extension of the debt limit would be “kick[ing] the can” on the debt ceiling. Jean-Pierre said the agreement reached by Senators Thursday morning is “a temporary respite, but we’re not going to let up until Senator McConnell stops obstructing and allows us to put this behind us for good.”

Sen. John Cornyn speaks to reporters outside the Senate Chambers on Wednesday, October 6, in Washington, DC. 

As Republicans begin their conference lunch this afternoon, leaders are encountering several GOP objections to their plan to quickly increase the country’s borrowing limit through Dec. 3.

What this means: The objections won’t ultimately block the passage of this bill, but could complicate the process and force McConnell and his leadership team to find 10 Republicans willing to vote “yes” on a procedural measure to advance the bill. 

GOP leaders had hoped that they could avoid that procedural vote and find agreement within their ranks to just allow the debt ceiling increase to pass with a simple majority. That’s proving to be difficult. 

“I’m not going to tell you who, but we have three people objecting and we hopefully will get that resolved at lunch,” a member of GOP leadership John Cornyn said.  

One of the three, Sen. Ted Cruz, a Republican from Texas, told reporters as he entered the lunch that he would demand a 60-vote threshold for the debt ceiling increase although he said he would not drag out the clock and would be okay with votes occurring Thursday.   

What other Republicans are saying: Sen. Rand Paul, a Republican from Kentucky, also told reporters that his main objection is he doesn’t think that this debt ceiling increase should only pass with a simple majority implying he also wants to see a procedural vote that would require 60 votes known as a cloture vote. Forcing that procedural vote would require 10 Republicans cross the aisle and vote “yes,” to advance the debt ceiling increase. It’s a tall order given that many of them have been saying for months they don’t want to lift a finger to help Democrats increase the debt ceiling.

Republican Whip John Thune confirmed to CNN that the conference is working through those issues, saying things are still “fluid.” 

Republican leaders are hoping to dissuade their members not to demand the procedural vote, but it’s not clear they will be successful. 

“I am hoping we can avoid the cloture vote. That’s a conversation we’re going to have at lunch. I don’t see the point in doing that other than just to delay the inevitable,” Cornyn said.

Council of Economic Advisers Member Jared Bernstein speaks with reporters at the White House, February 2021, in Washington, DC.

Jared Bernstein, a member of the White House Council of Economic Advisers, said the deal reached to extend the debt ceiling through early December “gives us some breathing room” but it “shouldn’t have ever gotten to this point” in the first place.

Bernstein blamed Republicans for the standoff, calling Democrats the “grownups in the room.”

“Democrats have been pushing hard to raise this debt ceiling. Eight trillion of this debt, in fact, was accrued under Trump and McConnell in the previous administration. And yet despite the fact that the debt ceiling has been raised 80 times in the past 60 years — in many cases through bipartisan cooperation —while Democrats have consistently tried to get Republicans to go along, they haven’t done so. So, sure, we’re glad to see this respite in terms of this Republican-driven potential default, but it shouldn’t have even gotten to this point,” he said.  

Bernstein said the White House is in close contact with Senate Majority Leader Chuck Schumer and his team.

Watch:

Senate Majority Leader Chuck Schumer took steps to set up a procedural vote on the short-term debt ceiling deal reached earlier today, in case any senators decide to try and slow walk the process. 

But Senate Majority Whip Dick Durbin suggested that Schumer’s move is precautionary. He said they don’t know of any GOP senators yet that plan to object to swift passage of the debt limit increase.

“I don’t think that signal has been sent or received yet, I hope it isn’t,” said Durbin, referring to any Republican senators objecting.

Note on timing: It still seems likely the Senate could pass it today with an agreement. If there are objections, it could delay final passage into the weekend, but it’s too soon to know if that would be the case.

Roger Ferguson Jr. speaks during the 2018 Yahoo Finance All Markets Summit at The Times Center on September 20, 2018 in New York City. 

Roger Ferguson, one of the most powerful Black executives in Corporate America, said the latest default scare shows why the debt ceiling should get eliminated. 

“It’s time to move away from the debt ceiling. It creates uncertainties every two or three years,” Ferguson, who served as a senior official at the Federal Reserve during 9/11, told CNN in an interview on Thursday.

Ferguson, who recently stepped down from the helm of $1 trillion money manager TIAA,called the short-term deal reached in Washington to raise the debt ceiling a positive. But he stressed that the United States is one of the only major economies in the world with a debt ceiling. 

Ferguson noted that the debt ceiling makes even less sense given that the global financial system is built upon the notion that US debt is riskless. A default would turn markets upside down. 

Ferguson joins a growing list of business and political leaders calling for killing the debt ceiling. 

Here’s who else has called for abolishing the debt ceiling:

In an interview with CNN, Fitch Ratings US chief analyst Charles Seville expressed support for eliminating the debt limit.

“It would remove this tail risk, or mitigate it in some way, so that it wasn’t something we need to worry about as much,” Seville said on Friday. 

Seville cautioned that Fitch doesn’t give policy advice, but added that debt ceiling standoffs do cause anxiety among investors. 

Treasury Secretary Janet Yellen also came out in favor of abolishing the debt ceiling. In a hearing last week, Yellen called it “very disruptive” to put the president and Treasury secretary in a position where they might not be able to pay the bills – bills that are the result of prior tax-and-spending policies. 

Billionaire investor David Rubenstein recently told CNN that the debt ceiling is pointless.

“It’s just an antiquated way to run the government of the United States,” Rubenstein said. “If it were eliminated, it wouldn’t change anything economically. It would probably eliminate a lot of political aggravation every time it comes up.”

Shortly after the market opened, the Dow was up around 500 points or 1.5%, while the broader S&P 500 rose 1.4%. 

The tech-heavy Nasdaq Composite was up 1.5%. The rally isn’t just on the heels of certain stocks doing well but is much more broadly based.

Meanwhile, the yield on the 10-year US Treasury bond also rose to 1.56%.

The US equity market has been on a roller coaster of late. Investors are struggling with worries about inflation, the US debt ceiling, the Evergrande debt crisis and the general state of the recovery.

Things were looking up Thursday after Senate Minority Leader Mitch McConnell offered options to prevent America from defaulting on its debts. Republicans had previously shut down Democrats’ proposals to raise the debt ceiling.

On top of that, weekly claims for unemployment benefits came in lower than expected and below the prior week’s level.

Senate Minority Leader Mitch McConnell claimed credit Thursday for preventing a debt default because “the majority didn’t have a plan to prevent default, so we stepped in.”

The Republican leader said Democrats were warned three months ago that they would have to use the budget reconciliation process – the same one they are using to pass major spending and tax plans on partisan votes – to raise the debt ceiling on a party line vote, but they didn’t act.

McConnell’s comments came moments after Senate Majority Leader Chuck Schumer announced on the Senate floor that Democrats and Republicans had reached an agreement on an extension of the debt ceiling through early December.

McConnell blamed Democrats for creating a “manufactured crisis.” 

Democrats have to this point refused to use the reconciliation process and want Republicans to share the political burden of raising the debt limit.

It remains unclear what will happen when the debt ceiling needs to be raised again in two months.