Democrats Hit Impasse on Biden Agenda, Debt Ceiling Increase

Democrats hit a wall in their high-stakes effort to simultaneously avert a government shutdown, avoid a debt default and advance President Joe Biden’s $4 trillion agenda, as feuding gripped lawmakers and a looming economic catastrophe shook markets.

A group of progressive Democrats on Tuesday said they would defy House Speaker Nancy Pelosi and oppose a bipartisan infrastructure bill in a planned Thursday vote without separate legislation for the bigger piece of Biden’s economic plans, which is still under negotiation.

In the Senate, Republicans for the second time in as many days blocked a Democratic move to raise the federal debt limit, escalating risk less than three weeks before the U.S. Treasury potentially runs out of capacity to avert a federal payments default.

Concern over the debt-ceiling impasse triggered a selloff on Wall Street, with stocks suffering their worst rout since May. Yields on Treasury bills maturing around Oct. 18 -- the date the U.S. Treasury potentially runs out of capacity to avert a federal payments default -- rose more than those on other securities.

And still unresolved is the fate of a stopgap funding measure to prevent a government shutdown after the current fiscal year ends on Thursday.

“Everybody’s waiting for Pelosi to pick another rabbit out of the hat. So we’ll see,” Representative Jimmy Gomez, a California Democrat, said.

Democrats have gathered behind closed doors since returning to Washington on Monday, trying to unite the warring progressive and moderate factions of the party behind a $550 billion infrastructure package and a larger social spending bill with a price tag of as much as $3.5 trillion.