The Debt Ceiling Crisis: Lawmakers Run Against The Clock, With One Outcome Guaranteeing Disaster

Congress is working against the clock to prevent the catastrophe that would be caused if the U.S. goes into default and can’t pay its bills, which could occur as soon as June 1, according to testimony from Treasury Secretary Janet Yellen.

What's At Stake: Yellen told Speaker of the House Kevin McCarthy on Monday that Congress has a month to agree on raising the debt ceiling, but that could amount to just 12 working days, according to Business Insider.

President Joe Biden is set to meet with top lawmakers on May 9 to push for a solution to the crisis, but according to Congress’ legislative calendar, time is running out. While the Senate will be in session for 14 days during May, the House is scheduled to be in session for just 12 days and between the two, there are only six days that both chambers will be in session at the same time, according to the publication.

If Congress is unable to come to an agreement and goes into default, the U.S. could immediately be thrown into a recession, the stock market could crash and Americans could lose a devestating amount of jobs. Still worrisome, is that if the lawmakers wait until the last minute to come to a decision, 200,000 jobs could still be lost, according to the report. 

Possible Debt Ceiling Resolutions: If lawmakers are unable to come to an agreement before the deadline, they could pass a temporary bill to halt the debt ceiling for a short period to give Congress more time to negotiate.

Senate Majority Leader Chuck Schumer is against this avenue, however, stating that it doesn’t make sense, according to The Washington Post.

Another possible outcome is that Biden and McCarthy agree on a bill the House passed to raise the debt ceiling but cut spending, which could have a positive outcome for the stock market, according to the Post. Biden wants a clean bill that doesn’t include spending cuts.

A third possibility is that House Democrats succeed at convincing several Republicans to join their effort to pass a “discharge petition,” which would require a minimum of 218 votes to pass. The move would allow the Democrats to call a bill to the floor without it first needing to be approved by McCarthy.

An option that Federal Reserve Chair Jerome Powell referred to as pulling a rabbit out of a hat, according to the outlet, would be that Biden could tell the U.S. Mint to create a coin worth $1 trillion and hope that the Fed will accept it so that the government can use that money to pay its bills.

Biden could also invoke the 14th Amendment and continue borrowing money to fund the government.

If the White House chooses not to take matters into its own hands and Congress can’t reach a solution, the U.S. will default on its debt and throw the economy and the stock market into chaos. Chief economist at research company Fwdbonds, Chris Rupkey, said this outcome would have immediate consequences, causing the market to fall 5% to 7% within hours and plunge the U.S. into a recession, according to the outlet.

Read More: Powell Takes the Stage: Another Rate Increase Widely Expected as Investors Eye Banks, Debt Ceiling

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