Democratic congressional leaders on Monday unveiled plans to suspend the nation's borrowing limit, following a White House warning of "economic catastrophe" unless that ceiling is raised.
The legislation also would fund the government through the end of the year after the current budget lapses on September 30.
But the fate of the plan is unclear since Republicans have vowed to withhold support for raising the debt ceiling, which is needed to fund spending already approved by lawmakers, including the massive rescue packages rolled out during the Covid-19 pandemic.
"The American people expect our Republican colleagues to live up to their responsibilities and make good on the debts they proudly helped incur," Democratic Senate Majority Leader Chuck Schumer and House Speaker Nancy Pelosi said in a joint statement.
They warned that "a reckless Republican-forced default could plunge the country into a recession."
Democrats have the majority in both houses of Congress, but the slim margin in the Senate means they will need some Republican support to push it through, since a single Senator can block any legislation that has less than 60 votes.
The measure would suspend the debt limit through December 2022 -- after the midterm congressional elections.
It also would keep the government running through the end of the year while legislators continue to debate two massive spending bills -- an eight-year, $1.2 trillion infrastructure package and a 10-year, $3.5 trillion package with a host of social programs, largely paid for by rolling back tax cuts.
Schumer and Pelosi said the measure unveiled Monday would avoid "an unnecessary government shutdown," and called it "must-pass legislation."
It will also include funds for disaster relief and Afghan evacuee resettlement, with the White House asking for $20 billion for hurricane and wildfire aid and $6 billion for tens of thousands of Afghan refugees.
"We look forward to passing this crucial legislation with bipartisan support through both chambers and sending to the president's desk in the coming weeks," they said.
But Republican Senate leader Mitch McConnell once again said Democrats should go it alone.
"They just want bipartisan cover so they can pivot as fast as possible to ramming through an historically reckless taxing and spending spree on a pure party-line vote," he said on Twitter.
That is a stark contrast from his position in 2019, when Republican Donald Trump was president and McConnell argued that failing to raise the borrowing cap "would be a disaster."
- 'Economic catastrophe' -
US Treasury Secretary Janet Yellen has warned that without an increase the government will run out of cash to fund operations and pay its debts sometime in October.
She said "failing to raise the debt limit would produce widespread economic catastrophe."
"The US has never defaulted. Not once. Doing so would likely precipitate a historic financial crisis that would compound the damage of the continuing public health emergency," she said in a column Monday in The Wall Street Journal.
The issue has frequently been a political football in politically-polarized Washington, with Republicans engaging in brinksmanship multiple times during the administration of Democrat Barack Obama.
But under Trump, Democrats supported Republican efforts to suspend the debt limit for two years.
The ceiling was reinstated on August 1 with debt at $28.4 trillion, and Treasury already is shuffling government funds around to continuing paying the bills.
In the aftermath of that conflict in 2011, the United States lost its coveted "AAA" debt rating from Standard and Poor's. That sent shock waves through the markets.
- Extraordinary measures -
Yellen, who had a phone call with McConnell last week, said even waiting until the last minute could cause a cascade of financial disasters including rising borrowing rates and 50 million seniors missing their government payments.
The Bookings Institution said the 2011 debt limit showdown raised Treasury borrowing costs by $1.3 billion, and in the 2013 impasse -- when Congress waited until the last minute to raise the debt ceiling -- investors dumped Treasury securities, and "those effects ripple throughout financial markets."
Treasury already has begun taking what it calls extraordinary measures to keep from breaching the cap on borrowing, but the steps will become increasingly stringent as the drop dead date approaches.
These include not investing in savings plans and retirement funds for government employees.
Once exhausted, the government will not be able to pay salaries for troops, employees and retirees, and worse it could default on debt payments.
The White House argues that the debt limit should not be a partisan issue, and business groups, economists and former Treasury secretaries of both parties have now, as in past instances, urged a rapid resolution.
The debt ceiling has been raised about 80 times since the 1960s.