What is happening now in the debt limit debate?

The United States this week hit a limit on how much money it can borrow, forcing the Treasury Department to take so-called extraordinary measures to ensure the country has enough money to meet its financial obligations.

Treasury Secretary Janet L. Yellen has told lawmakers that these measures will allow the United States to continue paying military salaries, pensions and interest to bondholders until at least early June.

But initiating those extraordinary measures is just the first step in a series of steps that will take place as the Treasury tries to prevent the United States from defaulting on its debts. Ultimately, it will be up to Congress to decide whether the country needs to borrow more money or if it cannot service its debts due to investors who expect to default on interest and other payments.

At stake is the fate of the US economy, which could face a financial crisis and plunge into a deep recession if lawmakers cannot come to an agreement.

One of the looming questions is when the United States will reach the so-called X-date — the point at which the government can no longer find creative ways to stay below the $31.4 trillion debt limit and will either have to borrow more money or not be able to. pay his bills.

The other big question: Will Congress agree to raise the borrowing ceiling?

So far, House Republicans have vowed to oppose any increase in the debt limit without spending cuts. President Biden has said the debt limit should be raised without conditions.

But ahead of a potentially protracted battle to ensure the United States does not default on its debt, Mr Biden and California Speaker Kevin McCarthy confirmed separately that they planned to meet to discuss how to raise the debt limit .

Here are some of the key moments to expect in the coming months.

A spring budget battle

The White House is expected to unveil its annual budget proposal in early March, outlining Mr Biden’s spending priorities. That could serve as the opening bid for any negotiations between the Biden administration and Republicans in Congress, who have called for spending cuts and are likely to use this document as evidence of what they say is “runaway spending.”

Extension of extraordinary measures

In a letter to Congress on Thursday, Ms. Yellen said she was instituting a “debt issuance suspension period” that would last until June 5. As a result, the Treasury Department will no longer invest money in certain federal health and retirement plans.

Ms Yellen will most likely send additional letters to lawmakers with updates on how much more time she can buy with those extraordinary measures. She will also outline additional measures the Treasury can take to stay below the $31.4 trillion debt ceiling.

That could include suspending the daily reinvestment of securities held by the Treasury’s Exchange Stabilization Fund, a bucket of cash that can buy and sell currencies and provide financing to foreign governments, or temporarily move money between government agencies and departments. to make payments when they are due.

The role of Congress

Congressional actions on the debt limit have increasingly waited until after the Treasury Department has nearly exhausted its extraordinary measures.

In 2021, the last time the federal government hit the debt ceiling, Senate Republicans and Democrats agreed to a short-term loan ceiling extension less than two weeks before a default. Two months later, when the Treasury warned it could exceed the legal limit on its ability to borrow, Congress gave its final approval to a measure that would raise the debt ceiling by $2.5 trillion.

Such a deal faces bigger challenges this time around.

Mr. McCarthy has called on the Biden administration and Democrats in Congress to negotiate budget cuts to win Republican support in the House for raising the debt limit. “We need to change the way we spend money wastefully in this country,” he said this month, “and we’re going to make sure that happens.”

Speaking at the White House on Friday, Mr Biden said there would be “honest debates” about how to deal with the country’s massive debt burden. He said he planned to raise it in his upcoming State of the Union address, in addition to meeting with Mr. McCarthy.

“I accept your invitation to sit down and discuss a responsible increase in the debt ceiling to address irresponsible government spending,” Mr McCarthy said afterwards, in a statement on Twitter. “I look forward to meeting you.”

Democrats, including Sen. Chuck Schumer of New York, the majority leader, have so far resisted the prospect of negotiations that force substantial cuts or cuts in Medicare and Social Security.

Still, Democrats may disagree on the need to pass a debt ceiling increase without addressing the budget deficit. Senator Joe Manchin III of West Virginia, a centrist Democrat, has expressed some support for curbing certain spending as Congress considers raising the debt limit.

Parliamentary solutions

In charting possible avenues for Congress to resolve the debt ceiling deadlock, officials and aides have floated the possibility of using a procedural tool known as the discharge request in the House. That scenario could allow ordinary Republicans to pass legislation that Mr. McCarthy and other majority Republican leaders do not support if they align themselves with the Democrats.

But while the mechanism “could be used to address various bottlenecks in the legislative process,” Molly Reynolds, a senior fellow in governance studies at the Brookings Institution, cautioned that “it’s not a particularly elegant strategy.”

The process is laborious and politically fraught, as it undermines the authority of the House speaker and the procedural control of the House. Lawmakers would have to settle for a measure that has the support of enough Republicans and Democrats — and could secure 60 votes in the Senate — and send that measure to a committee.

Lawmakers must then allow the measure to sit in committee for 30 legislative days when the House is in session, a period that could take months depending on the chamber’s schedule. Lawmakers must then collect 218 public signatures for the petition — meaning at least a handful of Republicans will have to join every Democrat to publicly oppose their party leaders.

Once those signatures are collected, a lawmaker must wait seven additional legislative days before expressing intent to take the measure to the House for a vote. That formal notice essentially requires the speaker to then schedule a vote within two legislative days.

But because of how long the process is dragging on and the political implications of Republicans forging a public alliance with Democrats against their conference majority, it is far from guaranteed that the parliamentary tool could be used to avoid bankruptcy.

It has not been used successfully since 2015, when the House voted to reopen the federal Export-Import Bank and Republicans who joined Democrats in backing the measure received implied support from the outgoing Speaker, John A. Boehner just before his retirement. But the threat of momentum behind a petition has often proved enough to pressure party leaders to vote on legislation they might not otherwise consider.