The Treasury Department's authority to borrow more money to pay the government's bills may run out in June, so Democrats want to raise the debt limit in the lame-duck session of Congress coming up. They would prefer a bipartisan bill raising the limit, but Republicans don't want that. The red team would prefer to blackmail the Democrats into repealing most of what they passed this year and also cutting Social Security and Medicare. If the Democrats don't give in to the blackmail, and the Republicans stand their ground, the U.S. would default on its debt and probably start a depression. Then the Republicans could try to campaign on "Biden started a depression" in 2024.
Plan B is raising the debt limit using the budget reconciliation process, which bypasses the filibuster. This would have to be done before the end of this Congress, because a future Republican-controlled House could block that action after Jan. 3 (as both chambers have to approve all bills). So there is a big hurry. Now, it appears that Sen. Joe Manchin (D-WV) may oppose using reconciliation, arguing for more negotiation with the Republicans. The Republicans would be overjoyed to continue negotiating right up to Jan. 3 at noon, when they will take over the House and block raising the debt limit there, even if the Democrats agree to use reconciliation in the Senate. This is yet another example of why having 51 senators is so much better for the Democrats than having 50. Having Sen. Raphael Warnock (D-GA) win the runoff doesn't change anything. He is already a voting member of the Senate and Senator-elect John Fetterman (D-PA) won't be seated until Jan. 3.
There is not much Joe Biden can do here to pressure Manchin. He has tried that 100 times already and Manchin doesn't respond well to pressure. Maybe this is all for show and at the last minute, Manchin will agree to raising the debt limit enough to get through 2023 in return for the Democrats killing off some social program he doesn't like. But if Manchin sticks to his guns, in June the Democrats will either have to give the Republicans what they want or gamble that there could be a worldwide depression, but that the Republicans get the blame for it in 2024.
There is one ray of hope, however. One issue that Manchin cares passionately about is permitting reform. So do a number of Republican senators, led by Sen. Dan Sullivan (R-AK). Manchin's complaint is that if some company is trying to build a pipeline or other energy project, and someone spots an owl in the area where construction would take place, environmental activists can hold the project up for 10 years while determining if the owl belongs to an endangered species. Manchin wants to speed up the process so it cannot be dragged out for years in the courts. He would like a final decision to be made on every energy infrastructure project within a year. It is at least possible that if Manchin can put together a bipartisan deal on permitting reform, he might be willing to raise the debt limit if it was packaged along with the permitting reform. But as usual, Manchin is playing his cards close to his vest, so nothing is certain yet.
Two other things worth noting. Although House Republicans are mavericks, Senate Republicans are generally less so. In particular, Mitch McConnell has historically been very unwilling to take this game of chicken beyond the point of no return. So, he could get involved in some arm-twisting of his fellow Republicans in the House, if it comes to that. Further, retiring Sen. Pat Toomey (R-PA) is an old-school fiscal conservative who most certainly does not want to see the U.S. default on its debt. If push came to shove, he could resign his seat early with an understanding that Fetterman be appointed as his replacement. This is not unheard of; it actually used to be a somewhat common maneuver to allow a new senator to get a head start on his or her seniority. We don't think it's likely that Toomey would do this, but it's not impossible. (V)