The legislative contortions were necessary because of Republicans’ intransigence on the debt limit. Given that Democrats are using the fast-track budget reconciliation process to muscle through Mr. Biden’s $2.2 trillion climate, tax and social spending bill over their opposition, Republicans had demanded that Democrats use the same maneuver — which shields legislation from a filibuster — to address the debt limit.
Democrats objected, arguing that both parties were responsible for raising the borrowing cap to accommodate spending that had been approved by and incurred under both Republican and Democratic administrations. Reconciliation, they added, would be an unnecessarily complex and time-consuming way to do so.
In October, Mr. McConnell relented temporarily, corralling 10 of his colleagues to join him in breaking his own party’s filibuster of a short-term increase to the debt limit, which then passed with only Democratic votes. But he warned in a scathing letter to Mr. Biden that he would not do so again.
A month later, Mr. McConnell and Mr. Schumer began quietly discussing alternatives, including the possibility of attaching a debt-limit increase to the annual defense policy bill, the last must-pass piece of legislation trudging through Congress before the end of the year.
Understand the U.S. Debt Ceiling
Card 1 of 6What is the debt ceiling? The debt ceiling, also called the debt limit, is a cap on the total amount of money that the federal government is authorized to borrow via U.S. Treasury bills and savings bonds to fulfill its financial obligations. Because the U.S. runs budget deficits, it must borrow huge sums of money to pay its bills.
When will the debt limit be breached? After Senate leaders agreed to a short-term deal to raise the debt ceiling on Oct. 7, Treasury estimated that the government would become unable to pay its bills soon after Dec. 15, when a $118 billion payment to the Highway Trust Fund is due.
Why does the U.S. limit its borrowing? According to the Constitution, Congress must authorize borrowing. The debt limit was instituted in the early 20th century so the Treasury did not need to ask for permission each time it needed to issue bonds to pay bills.
What would happen if the debt limit was hit? Treasury Secretary Janet Yellen told Congress that inaction on raising the debt limit could lead to a self-inflicted economic recession and a financial crisis. She also said that failing to raise the debt ceiling could affect programs that help millions of Americans, including delays to Social Security payments.
Do other countries do it this way? Denmark also has a debt limit, but it is set so high that raising it is generally not an issue. Most other countries do not. In Poland, public debt cannot exceed 60 percent of gross domestic product.
What are the alternatives to the debt ceiling? The lack of a replacement is one of the main reasons the debt ceiling has persisted. Ms. Yellen said that she would support legislation to abolish the debt limit, which she described as “destructive.” It would take an act of Congress to do away with the debt limit.
On Tuesday, congressional leaders announced the deal and the House passed the measure later that day with all but one Republican voting in opposition.
Several Republicans seethed over the agreement, accusing Mr. McConnell and his allies of caving and warning that the maneuver would set up a dangerous precedent that could erode the rules of the Senate filibuster that have long protected the minority party.
“It sure as hell sets in motion playing with the rules of the Senate in a fashion that I never even thought of until 24 hours ago,” said Senator Lindsey Graham, Republican of South Carolina. “I want to make this hard, not easy, because I think what we’re doing is going to really change the structure of the Senate and certainly going to do a lot of damage to the Republican Party.”