Senate Republican leader Mitch McConnell on Wednesday offered Democrats a deal to raise the US debt ceiling into December, which would alleviate the immediate risk of a default and could push it into an end-of-the year political fight.
Senate Majority Leader Chuck Schumer didn’t respond publicly, but he called a meeting of Senate Democrats and is expected to confer with Mr McConnell. The Senate meantime delayed an attempt to advance legislation to suspend the debt limit, which Republicans were poised to block.
Mr McConnell’s proposal would increase the limit on federal borrowing by a fixed dollar amount that would be sufficient to tide the Treasury over until December, when Congress would have to vote again to avoid a default.
That vote could come at about the same time that Democrats are attempting to move a massive tax and spending package. That’s also when Congress will have to act again to fund the government as part of regular fiscal-year spending, and avert a shutdown.
Mr McConnell has demanded Democrats use a process known as reconciliation to raise the debt limit without Republican votes. Mr Schumer has said there isn’t enough time to do that, given forecasts that the government will run out of borrowing authority by mid-October.
“This will moot Democrats’ excuses about the time crunch they created and give the unified Democratic government more than enough time to pass standalone debt limit legislation through reconciliation,” McConnell said in a statement.
Earlier on Wednesday, President Joe Biden enlisted top business leaders to push for immediately suspending the debt limit, saying the approaching October 18 deadline created the risk of a historic default that would be like a “meteor” that could crush the economy and financial markets.
"Our markets are rattled, Americans' savings are on the line... our Republican friends need to stop playing Russian roulette with the economy," Mr Biden said.
Wall Street strategists warn there is growing danger for financial markets as the clock ticks closer to October 18, the date by which US Treasury Secretary Janet Yellen expects the country to reach its debt limit.
During a virtual meeting with CEOs and business leaders, Mr Biden said raising the debt limit is "paying for what we owe."
Ms Yellen, who attended the meeting alongside Mr Biden, said a failure to raise the debt limit would be "a catastrophic outcome".
Traditionally, suspending or raising the debt ceiling has received bipartisan support. This time, he argued, Republicans should at least “get out of the way” and not filibuster Democrats’ efforts.
Mr McConnell had earlier said reconciliation is the only option because Republicans will not agree to raise the debt as Democrats negotiate Biden’s costly tax and spending plan.
Mr Biden had said on Tuesday evening that a “real possibility” is for Democrats to temporarily and unilaterally change Senate rules to head off a Republican filibuster and pass a debt suspension with Democratic votes.
But hopes of efforts to change the filibuster rules were quickly dashed by moderate Democratic Senator Joe Manchin, whose opposition to Mr Biden's $3.5 trillion social-spending bill has infuriated his Democratic colleagues.
Mr Manchin, long opposed to lowering the filibuster threshold, told reporters "nothing changes" in his stance.
Much of the recent increase in federal debt occurred when Republicans controlled the White House and Congress.
The Senate is scheduled to take a week-long break next week.
Agencies contributed to this report