Republicans trying to push Democrats to use budget reconciliation process to address debt limit: Expert

Molly Reynolds, Brookings Governance Studies Senior Fellow, joins Yahoo Finance to discuss the latest legislations in D.C. this week.

Video transcript

ALEXIS CHRISTOFOROUS: It is a busy week for lawmakers with legislation moves going on this week with the budget, the spending bill, and the infrastructure. Joining me now is Molly Reynolds, a senior fellow in governance studies at Brookings. And Molly, I want to start with infrastructure because debate begins today on the floor of the House on that bipartisan infrastructure framework. What do you expect to come from that debate?

MOLLY REYNOLDS: Right, so debate starts on that bill today. But a vote, should we see one, is not expected till the end of the week. And several weeks ago feels like a lifetime ago. Back in August, Speaker Pelosi promised a group of moderate House Democrats that there would be a vote this week on-- today, actually-- on that bipartisan infrastructure bill. And she has-- over the weekend, she announced they would start debate today with the plans to vote on that bill later in the week.

ALEXIS CHRISTOFOROUS: Now we know that that-- I've started this by saying it's a busy week for lawmakers. So Congress is facing a pair of approaching deadlines to fund the government and address the nation's $28.4 trillion debt ceiling. What are Congress's options for funding the government and also for raising the debt limit?

MOLLY REYNOLDS: Right, so the deadline for funding the government comes first as of midnight on Thursday, when we go from September 30th to October 1st. That starts a new federal fiscal year. And at that point, the funding for most federal discretionary programs runs out. And if Congress does not act, we would see a partial government shutdown.

The deadline for addressing the debt limit is a little fuzzier. The best outside estimates from my colleagues at the Bipartisan Policy Center put that deadline sometime between October 15th and the beginning of November. Obviously, when you are talking about something as consequential as the debt limit, you don't want to get up to the last minute. You want to take action before even the beginning of that window.

Right now, congressional Democrats would like to do these two things together, keep the government open, and address the debt limit in one bill. Republicans are obstructing that effort and have said that they would-- that they want Democrats to address the debt limit all by themselves with no votes from Republicans and are trying to push Democrats to use the budget reconciliation process to address the debt limit, which they could do without any votes from Republicans.

ALEXIS CHRISTOFOROUS: I want to get back to that partial government shutdown or the possibility of one. To people hearing this, you know, we've lived through this before. In many ways, it's, you know-- it's history repeating itself. But what would a partial government shutdown really look like for Americans?

MOLLY REYNOLDS: Yeah, so some of that depends on how long it lasts. But we, in the end of 2018, the beginning of 2019, we lived through a record length 35-day-long government shutdown, where, you know, various federal operations, various offices were closed. It was harder for Americans to apply for different kinds of federal loans, see their applications for benefits processed. So, really, we would feel the effects, both on an individual level and then on the economy as well.

Government shutdowns have cost us a lot of money to shut everything down, start everything back up again-- cost us in terms of economic uncertainty. And so we really would feel those effects, particularly if the shutdown went on for more than a few days.

ALEXIS CHRISTOFOROUS: But certainly, the debt limit, the idea of the debt limit has become a political pawn, in many ways. And I know that Congress is still weeks away from a debt-- a full-blown debt crisis that could lead to a default. But, you know, is it time to panic yet? What would defaulting on our debt really mean for-- especially for investors?

MOLLY REYNOLDS: Right, so if we think back to the last really serious debt limit crisis that we had in 2011, when we got close, but did not go over the debt limit cliff, if you will, there were all kinds of sort of conversations about what the effects would be on the markets, on the US bond rating. And I'll just say again that even though October 15th might seem like it's several weeks out, this is really not something that we want to play around with. We don't want to get right up into-- right up next to that deadline and sort of threaten going over the cliff.

ALEXIS CHRISTOFOROUS: All right, Molly Reynolds, senior fellow in governance studies at Brookings, thanks so much for parsing through all that with us.