Leaders Back Away From Raising Debt Ceiling, Punting Clash to New Congress

WASHINGTON — Congressional leaders have all but abandoned the idea of acting to raise the debt ceiling this month before Democrats lose control of the House, punting the issue to a new Congress when Republicans have vowed to fight the move, and setting up a clash next year that could bring the American economy to the brink of crisis.

Democrats had urged party leaders to act during their lame-duck postelection session to increase the legal borrowing limit, taking advantage of their party’s final months of unified control. Doing so, they argued, would avert a potentially catastrophic conflict over the issue next year, when Republicans have threatened to block the move unless it is accompanied by substantial cuts to domestic spending and social safety net programs.

Failure to raise the statutory cap on the nation’s borrowing power — expected to be reached at some point next year — would lead to a first-ever default, creating financial chaos in the United States and the global economy.

But a lack of political urgency and a shrinking window to act before the holidays appear to have squashed the effort to address the issue this month.

In an institution where action is driven largely by legislative and political deadlines, focus instead remains on avoiding a government shutdown Dec. 16, when a stopgap spending bill lapses. Negotiators are struggling to reach agreement on a sprawling government funding package, widely viewed as the last must-pass vehicle to carry unfinished legislative priorities.

Even if lawmakers reconcile their differences over how much money to split between military spending, a Republican priority, and domestic programs like health and education that Democrats have championed, top lawmakers and aides have acknowledged that it is unlikely Congress will take up a measure raising the debt ceiling.

“Oh, I wish — I don’t think so,” said Senator Richard J. Durbin of Illinois, the No. 2 Democrat. “We let this issue and this challenge do everything possible to slow us down, and even to stop the business of our government, and it’s just unacceptable. If I had my way, we’d change it tomorrow.”

Senior Republicans, particularly in the House, have repeatedly signaled that they plan to leverage any vote to avoid a default to force President Biden and congressional Democrats to accept a series of fiscal overhauls, deep cuts to federal spending and potentially reductions to Social Security and Medicare. In his bid to become House speaker, Representative Kevin McCarthy of California, the minority leader, is facing significant pressure from his right flank to take a hard line in negotiations over new spending and addressing the nation’s debt.

“We need to look at how we can reform these programs so that they’re available not just to people who are retired or retiring today but future generations of Americans,” said Senator John Thune of South Dakota, the No. 2 Republican, speaking at an event hosted by The Washington Post this week. “I think that’s a conversation we need to have.”

Mr. Biden has said he would oppose any effort to cut Medicare and Social Security funds.

The Treasury Department is projected to hit its borrowing limit next year, though it is unclear exactly when the agency will run out of so-called extraordinary measures to ensure payments continue for a few months.

Failure to act could result in staggering consequences for the U.S. economy, forcing American officials to choose between the continuity of assistance like Social Security checks and the payment of interest on the country’s debt. The threats from Republicans recall brinkmanship in 2011, when congressional Republicans sought to pressure President Barack Obama to accept similar spending cuts in exchange for raising the debt limit.

That standoff led to the downgrading of the credit of the United States and rattled American investors and the economy.

Goldman Sachs economists warned in an analysis this week that bipartisan support to raise the debt limit “will be necessary, but hard to achieve,” and that the United States could veer the closest it had come to the economic tumult of 2011 since that standoff. The analysts also noted that less than a quarter of Republicans and less than a third of Democrats who will serve in the House in 2023 were there in 2011.

“If I were going to continue here, I would hope they would do it now,” said Senator Richard M. Burr of North Carolina, one of several Republicans retiring at the end of the year, in an interview. “We all know that on Feb. 1, the 2024 presidential races start, so you’re automatically already in the political season before you do anything next year, and I would hate for one side or the other to take the debt ceiling and to use it for the purposes purely being political.”

Some Democratic lawmakers had floated using the fast-track budget reconciliation process to raise the debt limit, thus shielding it from a Republican filibuster. But party leaders have resisted the move, arguing that the vote should be bipartisan.

The maneuver also would be time-consuming, particularly in the Senate.

“The way we’ve done debt ceiling in the past is bipartisan,” Senator Chuck Schumer of New York, the majority leader, said at a news conference last month. “I’d like to see it done in a bipartisan way and get it done before the end of the year.”

Several Republicans, however, have said they do not feel the same urgency to take up the debt limit, amid a December pileup of unfinished legislative work. In the evenly divided Senate, at least 10 Republicans would need to join Democrats to ensure such a measure could advance absent a move to use the reconciliation process.

“I don’t think the debt limit issue is until sometime next year,” Senator Mitch McConnell of Kentucky, the minority leader, said at a news conference last month.

Asked about the debt limit, Senator Roy Blunt, Republican of Missouri, said, “I think it’s more important to get the government funded, and I think that might become an obstacle to doing that.”

Agreement on a government funding package has remained elusive, jeopardizing lingering hopes of attaching not only a debt limit measure but a list of legislative priorities. With the funding package left as the lone must-pass measure, lawmakers are eyeing adding a series of priorities, including a bill to overhaul how Congress counts electoral votes, mental health and medical programs, and tax proposals.

After weeks of negotiations, Republicans and Democrats remain at odds over how to split funding between military and social programs. Talks are set to continue through the weekend ahead of the Dec. 16 deadline, though aides said lawmakers could pass a one-week stopgap bill to give negotiations additional time.

But with senior lawmakers wary about upending any fragile funding agreement, a debt limit measure would be unlikely to make the cut.

While several officials in private acknowledged their chagrin that Congress might delay action on the issue, Democrats reiterated that they were prepared to oppose any Republican proposals to cut domestic spending, particularly for Social Security and Medicare.

“It’s an incredible thing that they’re even contemplating going down this road,” said Representative Hakeem Jeffries of New York, who is set to become the minority leader in January. “But if that’s a fight they want to have, with respect to holding the American economy hostage to the debt ceiling, that is a fight that we are prepared to lean into aggressively — and we will win.”

Jeanna Smialek contributed reporting.