Republicans offer stop-gap rise to debt ceiling after Biden calls in Wall Street titans

Joe Biden marshalls Wall Street titans to scare congressional Republicans into lifting the $39.1 trillion limit.

‘We are …Thelma and Louise’: Democrat senator Mark Warner at the US Capitol on Wednesday. Picture: AFP

Democrats are poised to accept a Republican lifeline to temporarily lift the US government borrowing limit after President Joe Biden marshalled Wall Street banking titans to scare congressional Republicans into urgently lifting the $US28.5 trillion ($39.1 trillion) limit.

Less than a fortnight away from an October 18 deadline, when the US Treasury will run out of money under current rules, Mr Biden on Wednesday (Thursday AEDT) called a public meeting with chief executives of America’s two biggest banks, Citi and JPMorgan, to lay out the “catastrophic” consequences of failing to reach an agreement. “My Republican friends need to stop playing Russian roulette with the US economy. If they don’t want to do the job, just get out of the way … it’s a meteor headed to crash into our economy we should all want to stop,” he said at the White House.

Democrats in the Senate, where the ruling party holds only 50 of the 100 seats, indicated on Wednesday night they would accept an offer by Republican Senate minority leader Mitch McConnell to let Democrats vote for temporarily lifting the debt ceiling “into December”.

This would give Democrats time to find a longer-term solution and will “protect the American people from a near-term Democrat-created crisis”, Senator McConnell said.

“This will moot Democrats’ excuse about the time crunch they created and give the unified Democratic government more than enough time to pass stand-alone debt limit legislation through reconciliation.”

Reconciliation requires a standard majority, which would be delivered by the casting vote of Vice-President Kamala Harris.

Democrats, themselves divided over Mr Biden’s Build Back Better spending bill, have been opposed to that idea, however, calling it too unwieldy, time-consuming and risky, preferring Republican support for a simple vote of 60 senators to increase the limit, raised three times during the Trump administration.

“We are, you know, Thelma and Louise with pedal-to-the-metal, you know, heading towards that cliff, and everybody’s got their heads buried,” said Democrat senator Mark Warner.

Mr Biden has repeatedly blamed Trump-era 2017 tax cuts, which supposedly cost the Treasury $US8 trillion in forgone revenue, for the impasse, which has, not for the first time, fuelled a hyper-partisan game of brinkmanship between the two major parties in Washington.

“There are huge economic costs already being borne by companies and lawyers trying to figure out what this means if something like this ever happens,” said JPMorgan chief Jamie Dimon, speaking online from New York, revealing investors would start seeking to protect themselves from a default from Monday.

“The cascading effects in the ensuing weeks could go anywhere from a recession to a complete catastrophe for the global economy,” he added.

Jane Fraser, chief executive of Citi, said financial markets’ volatility reflected growing concern the US could default for the first time in its history. “It’s not an exaggeration to say that even small distortions in the Treasury market can cost taxpayers tens of billions of dollars over many years,” she said.

Republicans have used the impasse to highlight the Democrats’ supposed profligacy, as the ruling party seeks to shepherd a $US3.5 trillion climate and childcare spending bill through a congress where Democrats command only a seven-set majority.

“Raising the debt limit is paying our old debts. It has nothing to do with new spending or what may be coming this year or other years. It has nothing to do with my plans on infrastructure or building back better, both of which are paid for but they’re not even in – in the queue right now,” Mr Biden said.

Debate over the debt ceiling, reminiscent of a close-run 2011 impasse that saw the US lose its AAA credit rating, rocking financial markets, comes as the Democrats’ signature policy agenda, to boost infrastructure spending by up to $US4.7 trillion over the next decade, flounders in Congress.

Progressive Democrats have refused to support a bipartisan $US1.2 trillion “roads, bridge and trains” bill, which Republicans agreed to support in July, until the larger, more controversial package, which Republicans oppose, is passed by the Congress.

Moderate Democrat senators Joe Manchin and Krysten Sinema have refused to back the bigger bill, which includes free childcare for all American families, free university and huge subsidies for renewable energy and electric cars.