The US Senate has been in a state of deadlock over the federal debt ceiling issue over the last few days. If the issue is not resolved, the country may go into federal debt default in less than two weeks. But this dramatic threat to the American economy may perhaps be avoided because the Democratic Senators seem close to accepting the Republican proposition.
The solution was first proposed on Wednesday by the Republican leader Mitch McConnell. His plan would provide the federal government with a little bit of leeway to find its way out of the crisis. McConnel announced on Wednesday that the Republicans are ready to give the federal debt ceiling an extension till December 2021.
At present, the situation is dire. If no Congressional actions are taken soon to raise the debt limit above its $28.4 trillion total limit, the US Treasury will run out of funds to dispense its functions by the 18th of October 2021.
A few Democratic leaders have already shown support for McConnel’s plan. Still, Chuck Schumer, the Senate leader of the Democratic Party, has not yet provided any answers about his party’s stand on the proposal.
The decision of the Democrats will be a difficult one because if they agree to the extension till December, it will become even more difficult for them to pass the two huge bills with massive expenditure that President Biden has put a lot of emphasis on.
Republicans suggest that an even longer debt ceiling extension could be possible with the help of reconciliation. But the Democrats see this system as too risky and are unwilling to go through it. In the next two weeks, the US treasury will run out of adequate funds to pay federal salaries, clear insurance payments, and provide unemployment support.
Financial experts are worried about the crisis being precipitated in the US Senate at present. They feel that a debt default will seriously throw the global economy out of gear and may even push up unemployment rates. Even cutting it too close to the final date can be distressing. In 2011, there had been a major crash in stock prices, and US debt had seen a credit downgrading when the debt ceiling crisis had been resolved just two days before the default date.
On Wednesday, US stock market indexes all started to improve when it seemed like the Senate was getting closer to a decision,
Before Wednesday, the Democrats considered innovative solutions like filibuster (60 votes needed to pass a resolution in a 100 strong Senate). But after Wednesday, hopes for these drastic measures have been reduced. Democratic Centrist Joe Manich has clearly stated that he will not support the filibuster move.
It seems all the more likely that the Democrats will have to accept the Republican proposal to avoid a major financial crisis in the country.