Senate Democrats poised to raise debt ceiling by $2.5 trillion

Democrats in the Senate moved forward on a $2.5 trillion debt ceiling hike on Tuesday, after Republicans cleared procedural hurdles last week for them to be able to avoid a lengthy budget reconciliation process.

The hike is supposed to last until 2023 without a need for further increases, the Hill said.

Republicans gave Democrats a one-time ability to avoid the filibuster with the increase, likely because Republican leaders were worried about the consequences of a default on U.S. credit and whether their party would be blamed.

Treasury Secretary Janet Yellen had warned that if a debt ceiling increase wasn’t passed by December 15, a default was a possibility.

Avoiding default

Republicans don’t want to be seen as supporting Democrats’ runaway spending, but they don’t want to risk a dip in the U.S. credit rating either.

Consequences of the U.S. defaulting on its obligations may include an increased interest rate on existing credit, higher rates on any new borrowing, or the inability to get more credit.

The stock market would also likely decline sharply, and interest rates for businesses and consumers would go up.

Currently, the U.S. runs a constant deficit and could not fund its obligations or other legislation without being able to borrow more money.

Not only would the U.S. need to cut or eliminate all social safety net spending under a default position, but it would likely need to cut crucial parts of the budget like defense.

Republicans looking for fiscal responsibility

Fourteen Republicans voted with Democrats to allow the debt ceiling increase to proceed without a filibuster. It isn’t that the other 37 Republicans think the U.S. should default, but rather that they wanted to force Democrats to do their own dirty work of raising the debt ceiling without any Republican help.

Democrats could have done this with budget reconciliation, but that process could take as much as two weeks and they didn’t plan ahead to have that much time. Democrats’ lack of planning once again put Republicans in the position where they had to at least grease the wheels in order to keep the U.S. from possibly defaulting.

While it does seem important to rein in the Democrats’ runaway spending, to do so at the expense of the entire country’s financial well-being doesn’t seem like the best plan.

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