Legislative Update

Democratic Leadership faces a challenging September
 
As Democratic leadership in the House and Senate work to prepare for the $3.5 trillion spending plan and the $1.2 trillion infrastructure bill later this month, they are also faced with the imperatives of continuing to fund the federal government after September 30 and raising the federal debt ceiling to allow the government to continue to borrow to pay its bills.  The Senate will return to Washington on September 13 and the House will return on September 20.
 
The spending bills
 
Following the passage in both houses of a budget resolution (with only Democratic votes) that contains spending instructions for a $3.5 trillion spending package, committees in the House and Senate are working to finalize the details.  The legislation is being worked via the reconciliation process, a budget and parliamentary maneuver that will allow for simple majority passage the Senate rather than the 60 votes needed to break a filibuster. 
 
In order to pass the initial budget resolution in the House, in August, Speaker Nancy Pelosi guaranteed a group of moderate Democrats that the $1.2 trillion bipartisan infrastructure bill that has already passed the Senate would be worked in the House on or before September 27.  Progressives are threatening to withhold their votes on the infrastructure bill if the $3.5 trillion package is not passed.  This requires delicate maneuvering on the part of House leadership as there will not be any Republican votes for the package and they cannot afford to lose more than three Democratic votes given their slim House majority.
 
In the Senate, where all 50 Democratic votes plus the vote of the vice president are needed to pass the $3.5 trillion package, Senators Joe Manchin (D-West Virginia) and Kirsten Sinema (D-Arizona) has indicated that they will not support a package that large.  Leadership is proceeding with the bill and hoping that they will ultimately support it.  
 
Avoiding a government shutdown
 
The federal fiscal year begins on October 1.  The House has passed nine of the 12 appropriations bills required to fund the federal government.  The Senate has passed none.  It appears likely that both houses will need to pass a continuing resolution which would fund federal government operations through mid-December with an eye toward passing the budget by then.  The continuing resolution would keep funding at FY 2021 levels.  Failure to pass either a budget or a continuing resolution would result in a government shutdown.
 
Raising the debt ceiling and avoiding default
 
To further complicate matters, Congress needs to increase the debt ceiling.  The debt ceiling is the statutory limit for what the federal government can borrow.  It was suspended by bipartisan Congressional action in 2019 with a reinstatement date of August 1, 2021.  On August 1 it was reinstated at $28.5 trillion (both publicly held and intragovernmental debt). 
 
Raising the debt ceiling does not authorize new spending; rather, it allows the federal government to continue borrowing. Failure to raise the debt ceiling could lead to a historic default.  During a Congressional debt ceiling fight in 2011, Standard and Poors stripped the United States of its AAA credit rating for the first time. 
 
If the federal government cannot continue to borrow to pay its obligations, it would need to suspend certain pension payments, withhold or cut the pay of federal workers and service members and delay interest payments – which would constitute a default.  A default would roil financial markets and damage the good faith and credit of the United States.
 
According to the Wall Street Journal, analysts at the Bipartisan Policy Center estimate that the U.S. Treasury could run out of cash sometime in the fall, though not likely before the end of the fiscal year on September 30. 
 
Democrats can pass a debt ceiling increase in the House without any Republican votes.  However, in the Senate, they need at least 10 Republican votes due to the filibuster. In late August 46 of 50 Senate Republicans signed a letter indicating that they would not be voting to increase the debt ceiling. 
 
Democratic leadership declined to make the debt ceiling a part of the reconciliation package as they argue that raising the debt ceiling should be a bipartisan action.  There is some speculation that they might attach the debt ceiling increase to the continuing resolution to fund government operations past September 30 in hopes that Republicans will relent in order to avoid a government shutdown.  Whether that approach is used, and whether it succeeds, remains to be seen.