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Some background info here

The federal debt ceiling has currently been suspended until August 1.

If this year so far is any indication, Senate Republicans will do everything possible to use a debt-ceiling showdown (and therefore the prospect of government shutdown) to squeeze concessions out of the Democrats or call for fiscal austerity.

Democrats are discussing using budget reconciliation to lower the threshold for raising the debt limit (or continuing the suspension of the debt ceiling) from 60 votes to a simple majority, since their chances of convincing 10 Republicans to cross the aisle are rather poor.

It's not so clear-cut though. The article linked at the beginning indicates it may be legally and politically difficult to adjust the debt ceiling through reconciliation:

Many experts argue that budget reconciliation allows for an increase -- though not another suspension -- of the limit. But some moderate Democratic members may be reluctant to vote for a debt ceiling increase that’s done without Republican votes, wary of getting attacked on the campaign trail in 2022 by GOP opponents as profligate deficit spenders.

The question: Does the Senate have a clear-cut legal path to adjust the debt ceiling and avoid a shutdown, or should America brace for another ugly budget fight and possible shutdown?

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  • tangent: I wonder what would happen if the Republicans use this pressure tactic and the Democrats respond with a "yup, you're right. We're calling the whole thing off. Go home everybody. No more government."
    – user253751
    Jul 5 '21 at 15:32
  • 1
    Do you think Republicans really want to shut the government down and have us stop paying on our debt with what that can do to destroy our credit rating?
    – Joe W
    Jul 5 '21 at 15:45
  • 2
    @joew I’m sure I’m missing some nuance in your comment, because Republicans did shut down the government, several times.
    – divibisan
    Jul 5 '21 at 16:45
  • Did you miss the part about stop paying our debts and destroying the countries credit rating? Notice I didn't just say shut down the government but I also included not paying debts.
    – Joe W
    Jul 5 '21 at 18:20
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    @phoog The US' credit rating was downgraded: en.wikipedia.org/wiki/… Jul 6 '21 at 0:46
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Not only is this possible, it's happened a few times.

The Wikipedia article for budget reconciliation has a list of reconciliation bills, and the article on the history of the debt ceiling has a list of bills that raised the ceiling.

Even if they aren't exhaustive lists, a quick comparison of the two show that the debt ceiling has been raised in a reconciliation bill three times in the 1990's:

SEC. 11901. INCREASE IN PUBLIC DEBT LIMIT.

Subsection (b) of section 3101 of title 31, United States Code, is amended by striking the dollar limitation contained in such subsection and inserting ‘$4,145,000,000,000’.

SEC. 13411. INCREASE IN PUBLIC DEBT LIMIT.

(a) GENERAL RULE- Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof ‘$4,900,000,000,000’.

SEC. 5701. INCREASE IN PUBLIC DEBT LIMIT.

Subsection (b) of section 3101 of title 31, United States Code, is amended by striking the dollar amount contained therein and inserting ‘‘$5,950,000,000,000’’.

Additionally, the debt limit was temporarily increased by P.L. 99-509 (Omnibus Budget Reconciliation Act of 1986):

SEC. 8201. TEMPORARY INCREASE IN PUBLIC DEBT LIMIT.

During the period beginning on the date of the enactment of this Act and ending on May 15, 1987, the public debt limit set forth in subsection (b) of section 3101 of title 31, United States Code, shall be temporarily increased by $189,000,000,000.

The quoted sections are adjusting 31 U.S. Code § 3101, which is where the public debt limit is defined, by striking out the current limit and replacing it with the new value.

Although reconciliation hasn't been used to raise the debt limit since 1997, it doesn't seem like anything has changed to prevent it from being used again. On the contrary, this explainer from the House Budget Committee in 2020 describes raising the debt limit as one of the core purposes of reconciliation:

  1. What is “reconciliation”?

Reconciliation is a tool – a special process – that makes legislation easier to pass in the Senate.

...

  1. Overview

In its annual budget resolution, Congress sets total spending, revenues, the surplus or deficit, and the public debt. The budget may also include reconciliation instructions. These instructions direct one or more committees to recommend changes to existing law to achieve specified changes in spending, revenues, deficits, and/or the debt limit.

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