What Republicans are thinking in the debt-ceiling standoff, according to Gary Cohn

Congress is running out of time to resolve the government debt showdown and risks defaulting on its debt. 

U.S. House of Representatives Democrats passed a measure earlier this week to fund the government through early December and suspend the nation’s debt limit through December 2022, but the proposal faces an uphill battle in the Senate, where GOP lawmakers have vowed to block it.

Republicans feel it is the Democrats responsibility to raise the debt ceiling alone using budget reconciliation, since that same method was used to pass a $1.9 trillion COVID-19 relief bill earlier this year, Gary Cohn, former director of the National Economic Council, told Yahoo Finance Live on Thursday.

“I think this is a tough debt limit discussion,” Cohn said. “The Republicans are saying to the Democrats, look, you came in all by yourself and reconciled $1.9 trillion of spending in January. You're talking about spending another $3.5 trillion now. You're using reconciliation — and by the way, you're well within your rights and well within the law to do that, but you also have the same reconciliation power to expand the debt ceiling. If you want to use reconciliation for these [other] things, use it for the debt ceiling as well.”

On the Senate floor Thursday, Senate Minority Leader Mitch McConnell said it would take Democrats about "a week… or a little more" to use budget reconciliation to raise the debt limit, adding it may be "inconvenient" but it’s "totally possible" for the party to avert a budget crisis before the Oct. 1 deadline. “If they (Democrats) want to tax, borrow, and spend historic sums of money without our input, they’ll have to raise the debt limit without our help. This is the reality,” McConnell said.

Democrats, however, have opposed using the method, saying it should be a bipartisan effort.

Regardless of how it’s passed, the stakes are high. If Congress fails to raise the debt ceiling, the country risks defaulting for the first time in history, an event that could rattle the markets and the fragile U.S. economic recovery.

“The debt ceiling is important. We have to expand the debt ceiling,” Cohn added. “The question is, is there a compromise between the Republicans and the Democrats or do the Democrats just need to go ahead and do it and do it through reconciliation? I don't know that answer. That's going to be negotiated at the most senior levels in the legislative branch.”

Seana Smith anchors Yahoo Finance Live’s 3-5 p.m. ET program. Follow her on Twitter @SeanaNSmith

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