The latest on the debt ceiling standoff in Congress

A US default would impact everyone in America and could take the nation decades to fully recover from, White House economists warned in a report on Wednesday. 

The report paints a bleak picture of how failure to raise the debt ceiling in time would set off wide-reaching consequences for everyday American families, businesses and investors.

Everything from paychecks to military personnel and Social Security benefits to the National Weather Service and maintenance of the US power grid could be threatened by a default, the White House economists said. 

The sobering forecast comes as Wall Street CEOs and other business leaders meet with the White House on Wednesday on the ramifications of a default. The Treasury Department has warned that if Congress doesn’t raise the debt ceiling, it will run out of cash and extraordinary measures by Oct. 18.  

The White House said tens of millions of people, including families with children, retirees and veterans, would potentially lose access to federal payments. That includes:

The economists warned a US default could set off an even worse meltdown than the one caused by the 2008 financial crisis – hurting an economy that has not yet fully recovered from Covid-19.

More on the report: The report, titled Life After Default, cited simulations done in the past by the Federal Reserve and the Peterson Foundation as well as a Moody’s Analytics projection that a default could cost America nearly 6 million jobs. 

“Compounding the damage of a default is the fact that the federal government would be immobilized in responding to the very economic crisis a default would likely create,” the economists said.  

The government would likely be unable to implement the relief that helped ease prior recessions, including during the onset of Covid-19. 

“Instead, the federal government could only stand back,” the economists wrote, “helpless to address the economic maelstrom.”

Sen. Chris Coons, a Democrat from Delaware, says "there very well may be" 50 votes in the Senate to change filibuster rules to let the debt ceiling bill be advanced by a simple majority, saying there’s “a lot of passion in the caucus” about the standoff with the GOP and getting the debt ceiling raised.

Sen. Dick Durbin, the Democratic whip, refused to say if they would seek to change the filibuster rules, saying “the first step is common sense” and that Democrats are “losing patience” with the GOP.

Senate Finance Chairman Ron Wyden, a Democrat from Oregon, said “this has to get done,” referring to the debt ceiling, and said, “Democrats are committed that bills incurred are actually paid.”

What a change to the filibuster would mean: A change to the filibuster rules would allow Democrats to avoid a potentially catastrophic default less than two weeks away, but every Democratic senator would have to be on board to make the change.

Democrats have the ability to raise the debt ceiling on their own but would need to use a lengthy congressional process called reconciliation to do so. Using reconciliation to raise the debt ceiling could take two weeks — very close to the Oct. 18 deadline laid out by Treasury Secretary Janet Yellen. Changing the filibuster rules would allow Democrats to move much quicker while still only using Democratic votes and Vice President Kamala Harris to pass the debt ceiling hike.

It would nullify the 60-vote requirement to break a filibuster to raise the debt ceiling, allowing a simple majority to do so instead.

One of the fiercest opponents to changing the filibuster rules, Democratic Sen. Joe Manchin of West Virginia, on Tuesday would not say if he would oppose a "carve out" in the filibuster rules, telling CNN that Senate Majority Leader Chuck Schumer and Senate Minority Leader Mitch McConnell need to cut a deal. The day before he said he was opposed to changing the filibuster rules.

CNN's Kaitlan Collins, Kate Sullivan and Maegan Vazquez contributed reporting to this post. 

Sen. Dick Durbin, the Democratic whip, says more will be known about next steps on the debt ceiling after the vote today. Asked what those steps may be, he said “I don’t know.”

The Senate will vote today to end debate and move to a final vote on a House-passed measure that would suspend the debt ceiling until Dec. 16, 2022. Republicans are expected to block it from advancing. 

Durbin also said he knew of no plans for top Sens. Chuck Schumer and Mitch McConnell to meet, as Democratic Sen. Joe Manchin, a key moderate, has suggested they do. 

The country is on the precipice of a financial calamity and Democrats are on the verge of potentially altering the contours of the Senate with a potential one-time rules change that would enable them to pass a debt ceiling increase well ahead of the Oct. 18 deadline.

It's a strategy that Democratic leaders have been socializing since last week in the caucus, but the idea got a serious boost on Tuesday night when President Biden said it's "a real possibility" that Democrats would establish a carveout of the filibuster rules to let the debt ceiling be increased by a simple majority vote.

Here's a look at the options (from most likely to least likely at this point) that Congress has to increase the country's borrowing limit by that date:

Democrats change the rules: This option is the most serious right now. CNN learned early on Tuesday that it was on the table, that it came up during a private lunch last week and was the subject of conversation Tuesday. This is essentially a carve out of the filibuster for the debt limit. Leadership's rationale here is that they don't need Republicans to raise the debt ceiling through reconciliation.

So, why do they need 60 votes to do this any other way? Some Democrats are arguing this wouldn't be akin to going nuclear or blowing up the filibuster on legislation, but you can imagine how it will be perceived by Republicans as a slippery slope. The ability to use this tool, however, is only possible if every single Democrat agrees to do it. Moderate Democratic Sen. Joe Manchin of West Virginia threw cold water on this Monday. Tuesday he said he was not going to talk about it and it was up to leadership to work out a deal. We'll see if anything changes.

Fellow moderate Democratic Sen. Kyrsten Sinema of Arizona has expressed deep concerns about changing the legislative filibuster too, but let's keep an eye on these two because this is a more narrow change.

Democrats cave and do reconciliation: For weeks, this seemed like the most obvious option, but time is really beginning to run out for this. The process is lengthy and complicated. It requires Democrats to say exactly how much they are raising the debt by and Majority Leader Chuck Schumer has been leading his caucus in saying he's not going there.

The process would require Democrats to pass a budget, put it on the floor, debate it for 15 hours, engage in a marathon vote series known as a vote-a-rama, have the Finance Committee write the debt ceiling increase, send it back to the floor for 20 more hours of debate, have another vote-a-rama and then finish it up. It's a lot, and you can understand why Democrats want to avoid it. But it's an option and up until Tuesday, it was perceived as maybe the most likely one.

That's now changed.

Republicans relent: This is what Democrats hope. They bring House-passed debt ceiling bill to the floor. No Republican forces a 60-vote threshold and Democrats vote to increase the debt ceiling with a simple majority. But, it's not happening Wednesday. It won't happen Thursday, and no, it isn't happening next week, either.

Even if GOP leaders got to a point where they'd let this slide, Roy Blunt, a Republican leader from Missouri, summed it up pretty well: "we really wouldn't have the ability to control all 50 of our members on this issue."

See: Sens. Ron Johnson of Wisconsin, Ted Cruz of Texas, Josh Hawley of Missouri and Bill Hagerty of Tennessee (who have been unafraid in the past to hold things up).

Biden does this using the 14th Amendment: There is no evidence that the White House is seriously entertaining this idea, but Senate Democrats have discussed it privately. Within the 14th Amendment, there is a public debt clause that says the "validity of the public debt of the United States, authorized by law, including debt incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned." Some read this to mean that the President can just keep paying the country's debts. The potential problem with taking this route is that it would likely end up in court. It's completely untested for this use, which is why it's not really on the table right now.

Read more about where things stand on the debt ceiling here.

The "debt ceiling" is exactly what it sounds like – the maximum that the federal government is allowed to borrow. Why is there a maximum? Because Congress set one more than a century ago to curtail government borrowing. But instead of sticking to it, Congress has gone ahead and raised the limit every time it's been hit.

The arguments in favor are generally the same every time. One is that the money's already been spent – raising the debt limit just lets us keep paying back our creditors. (More on that in a second.) Another is that failing to raise the limit would cause the US to default on some of its obligations, triggering a crisis in the financial system.

The reasons against it are simpler. Outstanding public debt is about $28.7 trillion. That's a hard number to choke down, and it's getting larger every second.

People really concerned about public debt will add in the currently unfunded liabilities of Medicare and Social Security and argue total US liabilities are somewhere north of $156 trillion.

Why this matters: Treasury Secretary Janet Yellen has been warning Congress for months about the consequences of not raising the limit. The US technically reached its limit in August, when a two-year reprieve Congress passed in 2019 expired. The Treasury Department has been moving things around to cover costs since then.

If the US defaults on the debt, there would be a domino effect, said Mark Zandi, the chief economist for Moody's Analytics:

If the threat of those consequences doesn't shake lawmakers into action and they do default, the problems would only escalate. Particularly, if they didn't immediately react and a default persisted for weeks, Zandi said it would:

There is a counterargument that the actual default would not be as cataclysmic as anticipated. When the country approached default in 2011, S&P downgraded the US credit rating, but the consequences were minimal since lawmakers ultimately paid the debt.

President Biden said on Tuesday that it’s “a real possibility” Democrats will adopt a carve out of the filibuster rules to let the debt ceiling be increased by a simple majority vote.

When CNN’s Kaitlan Collins asked Biden if Democrats are considering the nuclear option to raise the debt — using the carve out with the filibuster to raise the debt limit — the President said, “Oh, I think that’s a real possibility.”

CNN previously reported that the carve out was discussed at a caucus lunch on Tuesday. And while West Virginia Sen. Joe Manchin, a key vote for Democrats in the split Senate, had indicated on Monday that he was opposed to changing the rules for the debt ceiling, on Tuesday he would no longer say whether he’s open to the carve out.

What a change to the filibuster would mean: A change to the filibuster rules would allow Democrats to avoid a potentially catastrophic default less than two weeks away, but every Democratic senator would have to be on board to make the change.

Democrats have the ability to raise the debt ceiling on their own but would need to use a lengthy congressional process called reconciliation to do so. Using reconciliation to raise the debt ceiling could take two weeks — very close to the Oct. 18 deadline laid out by Treasury Secretary Janet Yellen. Changing the filibuster rules would allow Democrats to move much quicker while still only using Democratic votes and Vice President Kamala Harris to pass the debt ceiling hike.

It would nullify the 60-vote requirement to break a filibuster to raise the debt ceiling, allowing a simple majority to do so instead.

Read more about Biden's comments here.

CNN's Kaitlan Collins and Kate Sullivan contributed reporting to this post. 

The debt limit “X Date,” when the federal government will no longer be able to meet its obligations in full and on time, will arrive between Oct. 19 and Nov. 2, the Bipartisan Policy Center said in an updated forecast on Wednesday.

The new projection confirms that the US Treasury could miss payments in less than two weeks as Congress is stuck in a stalemate over how to address the debt ceiling. 

This forecast narrows a previous projection from the think tank of Oct. 15 to Nov. 4.  

The Bipartisan Policy Center report coincides with the official warnings from the Treasury Department. Treasury Secretary Janet Yellen told lawmakers last week that if Congress fails to raise or suspend the debt ceiling, the federal government will run out of cash and extraordinary measures by Oct. 18. 

More context: After that point, the Treasury would no longer be 100% confident it could meet its obligations on time. Yellen told lawmakers last week Treasury would find itself in an “impossible situation” either on Oct. 19 or “a few days thereafter.” 

The Bipartisan Policy Center warned that failing to act “in the coming days” to address the debt limit “would be unprecedented and could yield significant economic consequences.” 

The report noted that interest rates on short-term Treasuries that mature near the X-Date range have started to rise, “demonstrating a degree of concern in the market.”

“Even briefly crossing the X Date could precipitate a stock market plunge, wiping out trillions of dollars in 401(k)s and other savings,” Akabas said. “A prolonged debt limit stalemate would likely lead to an economic contraction and increased unemployment, derailing the nation’s recovery from the COVID-19 pandemic.”

President Biden on Wednesday is set to ramp up the pressure on Republicans as the nation's nears the deadline to raise the debt ceiling. Biden looks to argue the GOP is putting the country at risk of a possible debt default by standing firm against raising the nation's debt limit.

The President is set to meet with top banking, financial and various industry leaders at the White House at 1 p.m. ET today as he ratchets up the public pressure campaign to raise the nation's debt limit in a bipartisan way as Republicans continue to block efforts to do so. Democrats are able to raise the debt ceiling on their own without Republican votes but would need to use the lengthy reconciliation process to do so. Democratic leaders in the House and Senate have said they are not willing to use that process and instead are looking for Republicans to cooperate with paying the nation's bills.

Treasury Secretary Janet Yellen, who will be in attendance on Wednesday, said last month that the nation will run out of money to pay its bills on Oct. 18, leaving the US facing default for the first time in its history.

On Tuesday, Biden said it's a "real possibility" Senate Democrats could allow for a one-time carve out of Senate filibuster rules in order to address the debt ceiling, but it's unclear whether Democrats would have enough votes within their own party for the rule change.

Read more about Biden's meeting today here.

Republicans and Democrats in Washington are gearing up for their occasional fight over raising the US debt limit.

Democrats will try to shame Republicans, arguing raising the limit has more to do with paying bills for money already spent rather than new spending.

It's a valid point, but Democrats' current effort to pass both a $1.5 trillion bipartisan infrastructure and a $3.5 trillion Democrats-only infrastructure bill to remake the economy and address climate change complicates their message.

So they'll try to shame and cajole Republicans. They could also sugarcoat the debt limit vote by burying the measure in a must-pass spending bill. Keep the government running and keep the government solvent.

The smart money is still on lawmakers figuring out a way to raise the limit and pay the bills for the money they've (we've) already spent.

When Republicans did seriously threaten to get in the way of the debt limit increase, in 2011, Cillizza points out that it led Standard & Poor's to downgrade its ratings on US debt for the first time in seven decades.