Democrats’ new plan to raise the debt limit will rely on some help from Republicans

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  • Congressional leaders are considering a strategy that would allow Democrats to raise the US debt limit without Republican votes.
  • The Treasury Department estimates that the US will not be able to pay its bills on December 15 if lawmakers fail to raise borrowing limits.
  • Under a developing plan, lawmakers would attach a one-time provision that would allow the Senate to raise the debt limit with a simple majority in a bill designed to block Medicare cuts.
  • Democrats could then raise the borrowing limit without Republican votes.

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Republicans can help Democrats lift the debt limit — in their own way.

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GOP congressional leaders have said for months that they will not vote with Democrats to raise the debt limit and address the threat of a US default for the first time. Top lawmakers may have found a new way for Democrats to raise the borrowing limit before December 15, the estimated date when the Treasury will no longer be able to pay its bills.

The process will be complicated and carry risks. If the House and Senate can pull it off, Washington would eliminate the risk of a default that could wreak havoc on the global economy and stock markets.

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The strategy would add an effort to raise the loan limit to a bill designed to prevent automatic Medicare spending cuts occurring at the end of the year. Lawmakers will pass a provision in the health care bill that would allow the Senate to raise the debt limit once with a simple majority vote.

Under the plan, at least 10 Republicans would have to vote to allow Democrats to raise the borrowing limit on their own. Then Democrats, who hold a 50-50 Senate majority through Vice President Kamala Harris’ tiebreaking vote, could raise the debt limit in a separate vote without GOP support.

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The House Rules Committee is set to consider a version of the Medicare bill that includes debt-limit language on Tuesday. As soon as it could be passed by the entire house on Tuesday night.

If both houses of Congress pass the law and President Joe Biden signs it, Democrats may hold separate votes to raise the debt limit. A source told CNBC that the Democrats’ plan would raise the borrowing limit to about $2 trillion, enough to carry the US through the 2022 midterms.

Senate Majority Leader Chuck Schumer expressed confidence Tuesday that Congress would prevent a default — without specifying how it would do so.

“Over the past few days we have made good progress on this issue and I hope we will be able to avert the terrible prospect of America defaulting on our sovereign debt for the first time,” he said on the Senate floor.

This proposal will bring some relief to both the parties. Republicans will not have to vote for a debt limit increase. Democrats will not have to include the borrowing limit increase as part of the budget reconciliation process they are using to pass a $1.75 trillion social spending and climate package.

As part of the strategy, Democrats must set a specific dollar figure for the debt limit, which Republicans may try to use as a political weapon.

Congressional leaders considered adding debt-limit language to the National Defense Authorization Act, an annual bill that sets defense spending levels, rather than Medicare legislation. They decided against it, because the NDAA vote would have been more politically difficult for Senate Republicans who oppose the debt-limit maneuver and progressive House Democrats who are against increased defense spending.

Schumer and Senate Minority Leader Mitch McConnell have talked about how they can prevent the default. But it’s not clear whether enough GOP senators will sign off on the developing plan for it to succeed.

Sen. Roy Blunt, R-Mo., told reporters he expected the strategy to garner substantial Republican support.

According to NBC News, he said, “Everyone is hearing a lot from hospitals at home about the importance of solving this Medicare problem. And so, probably, a big vote.”

Both sides have generally favored raising the loan limit, which has been a routine exercise for decades. The GOP has argued that Democrats should increase it on their own this year as they push to pass their $1.75 trillion social spending and climate package without Republican votes.

Raising the borrowing limit does not authorize new spending. Treasury Secretary Janet Yellen also noted that Congress would have to raise the debt limit even if Democrats passed spending bills this year.

— CNBC’s Yalan Mui

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