The next steps in Washington's very busy week are currently up in the air.
Now the Democrats are likely going to have to move on those issue one at a time with an Oct. 1 deadline to avert a shutdown and Oct. 15 or soon thereafter to address the debt ceiling.
“It's never even conceivably thoughtful to think about defaulting,” Jared Bernstein, a member of President Biden's Council of Economic Advisers, told Yahoo Finance, but “this is a uniquely horrible time to be playing politics with government shutdowns and debt ceilings.”
Bernstein, who previously served as chief economist to then-Vice President Joe Biden in the Obama administration, spoke to Yahoo Finance Live to discuss the debt ceiling and other debates going on in Washington (video above).
Republicans argue they’ve been clear all along about their opposition to a debt ceiling increase and that Democrats need to do it by themselves via the Senate reconciliation process.
On the Senate floor Monday, Senate Minority Leader Mitch McConnell (R., Ky.) said Democrats “intend to sideline Republicans and go it alone to slam American families with historic tax hikes and borrowing,” and so “they will need to raise the debt limit on a partisan basis as well.”
Democratic leaders are also attempting this week to pass a bipartisan infrastructure deal and develop a “framework” for the multitrillion-dollar budget reconciliation package in addition to the twin economic deadlines. On Monday night, House Speaker Nancy Pelosi announced that a final deal on the reconciliation package is likely off the table for this week but that she would attempt to move forward with the infrastructure vote on its own.
‘There's a pandemic out there’ amid debt ceiling standoff
Bernstein argues the entire agenda is needed to help the economy come back, but that a debt standoff is particularly ill-advised. We “still know that there's a pandemic out there, we still know that there's more people to get vaccinated, and we know that we have these supply chain constraints,” he said.
School re-openings and ongoing childcare concerns keeping some workers out of the labor force – just two sources of economic vulnerability – would be address in the budget reconciliation plan.
The reconciliation bill may also help blunt rising inflation for some Americans, according to Bernstein. “We know that certain services – health care, education, housing – have increased faster than average inflation,” he said. “That’s where the pressure has been for working families and that's precisely what the president attacks with this plan.”
Bernstein pointed to provisions in the package to build more affordable housing, tackle prescription drug costs, and support for parents seeking childcare.
Republicans said Democratic spending plans are what's fueling the inflation: Negotiations to enact "reckless taxing and spending spree behind closed doors... would make inflation even worse," said McConnell
But everything could be superseded by a further debt ceiling crisis. Not raising the limit, Bernstein said, “is perfectly analogous to sitting there at the restaurant, having your meal, and when the check comes, saying no thanks.”
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.