On The Money — Presented by NRHC — Democrats cross the debt ceiling Rubicon

Happy Tuesday and welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. Subscribe here: digital-staging.thehill.com/newsletter-signup.

Today’s Big Deal: Democrats have closed the door on using budget reconciliation to raise the debt ceiling and have 13 days to figure out a way to get it done. We’ll also look at Biden’s push to bridge Democratic divides and backlash to his tax plan.

But first, Taylor Swift makes an appearance in the Virginia governor race.

For The Hill, I’m Sylvan Lane. Write me at slane@digital-staging.thehill.com or @SylvanLane. You can reach my colleagues on the Finance team Naomi Jagoda at njagoda@digital-staging.thehill.com or @NJagoda and Aris Folley at afolley@digital-staging.thehill.com or @ArisFolley.

Let’s get to it.

Democrats insist they won’t back down on debt ceiling

Senate Democrats on Tuesday insisted they would not back down to Senate Minority Leader Mitch McConnell (R-Ky.) in a high-stakes standoff over the federal debt limit.

With just days to go before a potential debt default, which would be the first in U.S. history, Democrats emerged from a luncheon strategy meeting saying there was no way they’d use the lengthy budget reconciliation process to raise the debt ceiling.

The forceful opposition came from lawmakers like Sen. Tim Kaine (D-Va.) who have made clear that Democrats, with their control of the White House and Congress, cannot let the debt limit deadline lapse. 

• “We’re not doing it on reconciliation … it’s too complicated,” Kaine said.

• Other Democrats said there simply isn’t enough time to go the budget reconciliation route: “It’s impossible to do that now,” said Sen. Sherrod Brown (D-Ohio), chairman of the Senate Banking Committee. “There’s too many pitfalls. It takes too long.” 

The entrenchment on both sides is making some members of each caucus nervous as Treasury Secretary Janet Yellen ramps up calls for Congress to raise or suspend the debt limit by Oct. 18 to avoid a financial catastrophe that could cripple the U.S. economy.

Some Democratic senators are discussing the possibility of carving out a special exception to the filibuster that would allow the debt ceiling to be suspended with just 50 votes. 

• That would require overruling the Senate parliamentarian and creating a new precedent — a controversial tactic known as the nuclear option.
• Centrist Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.) have made clear this year that they do not support gutting the Senate’s filibuster rule, which requires 60 votes for most legislation.
• But even President Biden, a staunch defender of Senate norms, called it a real possibility.

What comes next: Schumer has scheduled a vote on Wednesday that will need the support of 10 Senate Republicans to advance legislation to suspend the debt ceiling until December 2022. 

“Tomorrow’s vote is a chance for some Republican senators to show some independence from the extreme members of their conference who are running for president,” Schumer told reporters after meeting with his caucus.

“All we need is 10 Republicans to vote with us, then none of them have to vote to raise the debt ceiling,” he said, warning a potential credit downgrade “is hovering over us.”

Read more here.

A MESSAGE FROM NRHC

We Believe in Rental Housing

Single-family rental home companies are helping residents experiencing economic hardship and ensuring a ready supply of quality, affordable, well-located rental housing.

LEADING THE DAY

Biden meets with vulnerable House Democrats with agenda in limbo 

President Biden met Tuesday with nearly a dozen vulnerable House Democrats as he and party leaders race to adopt his massive economic agenda before month’s end. 

• Democrats consider enactment of Biden’s two-piece domestic plan crucial to the party’s chances of keeping control of the lower chamber in next year’s midterm elections — and history isn’t on their side. 
• Leaders in both chambers are scrambling to unite their clashing factions behind both the bipartisan infrastructure component and a larger, more controversial package of climate and social safety net programs. 

Biden is now taking the lead in reconciling—get it?— those differences and Tuesday’s virtual meeting with House front-liners was the second in as many days. 

The state of play: The warring progressive and centrist factions appear to be slowly moving toward agreement on an overall top-line spending figure for the social spending package that’s expected to expand paid family leave, child care programs, and measures to reduce the cost of prescription drugs. The Hill’s Scott Wong, Mike Lillis, and Cristina Marcos have more here.

A MESSAGE FROM NRHC

We Believe in Rental Housing

Single-family rental home companies are helping residents experiencing economic hardship and ensuring a ready supply of quality, affordable, well-located rental housing.

A TAXING DEBATE

Republicans escalate attacks on IRS bank-reporting proposal

Republicans in recent days have ramped up their criticism of a proposal under discussion by Democrats to increase the amount of information financial institutions report to the IRS about bank accounts.

Democrats are considering such a proposal as a way to help pay for their massive social spending package, though they have not finalized details.

• What Republicans are saying: GOP lawmakers have raised privacy concerns about the idea, with Senate Minority Leader Mitch McConnell (R-Ky.) calling it an “absurd new IRS spying provision.”
  
• Democrats push back on the attacks: Democrats say the proposal would not involve banks providing detailed transaction information to the IRS, and say it would help to ensure that wealthy people pay the taxes they owe.

Read more here.

STAND BY YOUR MAN

Biden backs Powell as Warren goes after Fed chief 

President Biden remains confident in Federal Reserve Chairman Jerome Powell, as the Fed chief faces scathing criticism from Sen. Elizabeth Warren (D-Mass.).

“Thus far, yes. I’m just catching up on some of these assertions,” the president told reporters before leaving Michigan, where Biden gave a speech on his economic agenda.

Principal deputy White House press secretary Karine Jean-Pierre told reporters Biden “does have confidence in Powell at this time,” as Warren has called on the president to replace the Fed chair amid backlash over financial trades by some of the Federal Reserve’s top officials.

In a speech on Tuesday, Warren said Powell “failed as a leader,” accusing him of ignoring a “culture of corruption” at the Fed and failing to take appropriate action after three colleagues disclosed high-value financial trades conducted in the early days of the pandemic.

Read more here.

Good to Know

A federal appeals court just ruled against four Democratic-leaning states that mounted a legal challenge to the cap on the state and local tax deduction created by Republicans’ 2017 tax law.

Here’s what else have our eye on:

• New York officials announced public libraries will stop charging late fees and fines related to overdue books in efforts to reduce inequities in the city.
• Forbes magazine said that former President Trump fell off it’s list of America’s richest people, marking the first time in 25 years he has not been on Forbes 400.

That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you tomorrow.