Jason Lange

WASHINGTON (Reuters] – A standoff in the U.S. Congress could cause a financial crisis and an economic meltdown if Congress fails to raise a limit for government borrowing by Oct. 18th. That’s the date when the U.S. Treasury may run out cash to pay its bills.

One of the key characters in this drama is Senator Mitch McConnell. He leads the Republican Senate minorities and has made a vow to stop normal legislative efforts to increase the debt limit. And Senator Chuck Schumer. Schumer is the leader of the Democratic majority chamber and an ally for President Joe Biden.

These are just a few ways that the Senate could be swept up in the fight for power:

RECONCILIATION

Schumer, who has failed twice in his attempts to gain approval under regular legislative procedure for an increase to the debt ceiling, will again try to do so on Wednesday.

McConnell’s Republicans have blocked prior attempts. The Senate’s filibuster rules requires that a majority of 60 senators vote to approve legislation. When Vice President Kamala Harris votes, the 100-member chamber splits 51 to 51.

Schumer may attempt to reopen the filibuster on Wednesday, but that is not unusual. Instead, the Democrat might switch to reconciliation, an obscure legislative process. This would bypass the filibuster, and Democrats would need only a simple majority in order to win. This path carries its own risks, however, as congressional rules would require a lengthy process https://www.reuters.com/world/us/how-could-us-senate-democrats-raise-debt-limit-their-own-2021-10-04 in both the House of Representatives and Senate.

MCCONNELL RELENTS

McConnell might lift the Republican filibuster blocking order in Wednesday’s vote, or later days, if Schumer keeps his current strategy intact and continues to bring up the failing bill or another similar bill for votes.

Investors in financial markets have been cautious about the risk, believing that Washington will not create a financial crisis through defaulting on its debt.

However, McConnell could feel more pressure as October 18 nears.

Reformed FILIBUSTER

The debt ceiling has been a topic of contention between Republicans and Democrats, especially in the past 10 years when Washington has become more divided.

In the past, minorities have used debates to push for other legislative priorities such as deficit reduction. McConnell stated Monday that his party does not have any demands, and wants Democrats to engage in the reconciliation process.

Schumer could respond by moving for a ban on the use of filibuster to stop debt ceiling bill bills being passed, according William Hoagland (an ex-Republican Senate staffer) now at the Bipartisan Strategy Center.

But there are some risks. Modifying Senate rules will require all votes the Democrats have, and prominent Democrats are staunch supporters of filibuster.

DEFAULT

It is unlikely that Washington would be in this situation, but if Washington uses all of its remaining borrowing tools around Oct. 18 to meet its $28.4 trillion limit, then it will no longer have any incoming tax receipts to pay its bills. And because it currently borrows more than 20 cents for every dollar it spends, the Treasury would start missing payments https://www.reuters.com/business/standing-precipice-washington-courts-debt-limit-catastrophe-2021-09-29 owed to lenders, citizens or both.

Global financial markets would be hit by shock waves. The U.S. would be in recession if it cuts domestic spending. This is because the government has missed payments for everything, from Social Security benefits to the elderly, to salaries of soldiers.