WASHINGTON — Democrats are keeping an eye on a looming debt ceiling as they craft spending bills around President Joe Biden’s agenda.

What You Need To Know

  • Congress voted in 2019 to pass a two-year budget and debt ceiling bill that would suspend borrowing limits until July 31, 2021
  • Treasury Secretary Janet Yellen warned of catastrophic consequences if lawmakers don't act soon

  • The U.S. has never defaulted on its debt

They are readying an ambitious two-track blitz to pass through an infrastructure bill and a separate reconciliation process that would include priorities that could not find bipartisan support.

The latter would ride a budget resolution, which Democrats are looking to pass before the fall. But they also have to handle the suspension of the nation’s borrowing limiting set to expire at the end of this month.

“The debt that we've accumulated will be adjusted upwards,” said Bill Hoagland, the senior vice president of the Bipartisan Policy Center. “And we have to determine how to pay for this additional debt that we've accrued.”

Senate Democrats have options but they’re still figuring out a pathway to passing a debt ceiling solution.

“We certainly know the very serious responsibility of meeting our obligations,” said Sen. Tammy Baldwin, D-Wisconsin. “I think that it is still unclear whether that will be incorporated into this next budget reconciliation package or not.”

Janet Yellen, U.S. Treasury Secretary, urged lawmakers during a senate subcommittee hearing last month, to act soon before the July 31 deadline.

"Failing to increase the debt limit would have absolutely catastrophic economic consequences,” said Sec. Yellen. “This is not about authorizing additional spending; this is simply about the government paying its bills.”

The U.S. has never defaulted on its debt.

On August 1, if Congress fails to act, Sec. Yellen has cash that she can use to honor any interest payments that come due. She also has other resources she could tap into to keep the country afloat.

“The secretary has the authority to make changes in some of the accounts so that she manages,” said Hoagland. “The pension accounts, not making a deposit into the civil service account is something that she could do that would free up money.”

But the Bipartisan Policy Center said flexibility won’t last too long. While the center doesn’t have a date for when the U.S. could run out of money, it believes it could happen in the fall.

Hoagland said the current U.S. model for addressing the issue is unsustainable.

“I personally think that we should do away with the statutory debt limit and focus on each one of those pieces of legislation that we pass to determine whether we need to borrow money to support that, whether it's spending our taxes to pay for the expenditures that we are incurring," Hoagland said.

Twenty-nine Republican senators voted to suspend the borrowing limit in 2019. Sen. Ron Johnson, R-Wisconsin, who voted against raising the cap, said its now time for Congress to rein in spending.

“These are signals again that are just screaming at policymakers to stop deficit spending,” said Sen. Johnson. “We have to stop mortgaging our kids’ futures.”