Senate Republicans block U.S. debt-limit hike as shutdown looms

WASHINGTON, Sept 28 (Reuters) – U.S. Senate Republicans blocked an attempt on Tuesday by President Joe Biden’s Democrats to head off a potentially crippling U.S. credit default, raising questions about whether partisan tensions will threaten the nation’s economy.

With federal government funding due to expire on Thursday and borrowing authority set to run out on Oct. 18, Democrats who narrowly control the Senate and House of Representatives are working to head off twin fiscal disasters while also trying to advance Biden’s ambitious legislative agenda.

Democratic Senator Chris Coons told Reuters that a bill to avoid a shutdown could advance in Congress on Wednesday. “I think more likely than not” that such a bill will be on the Senate floor, Coons said, adding: “It will come over from the House.”

Republican Senate leader Mitch McConnell blocked Democrats on Tuesday from holding a vote that would have suspended the nation’s $28.4 trillion debt limit. Senate Republicans a day earlier defeated legislation that would have raised the debt limit and extended government funding.

Lawmakers now have just three days to avert a possible government shutdown by midnight Thursday, the end of the current fiscal year. Failure to do so could results in furloughs for hundreds of thousands of federal workers in the middle of a public health crisis.

Fiscal brinkmanship has become a regular feature of U.S. politics thanks to partisan polarization.

The most recent government shutdown, which occurred during Republican Donald Trump’s presidency, lasted 35 days before ending in January 2019.

Coming ahead of next year’s congressional elections, a government shutdown or a default would be a setback for Democrats, who have portrayed themselves as the party of responsible government after Trump’s chaotic presidency.

‘POTENTIALLY CATASTROPHIC’

Treasury Secretary Janet Yellen told lawmakers the government would run out of options to service the debt by Oct. 18. Republicans have refused to cooperate to raise the debt limit, saying they do not want to help Democrats spend more money. Democrats point out that much of the nation’s debt was incurred under Trump.

The nation’s largest lender, JPMorgan Chase & Co (JPM.N), has begun scenario planning for how a potential U.S. credit default would affect its operations, Chief Executive Jamie Dimon told Reuters on Tuesday.

“This is like the third time we’ve had to do this. It is a potentially catastrophic event,” Dimon said. “We should never even get this close.” read more

Senate Majority Leader Chuck Schumer proposed holding a vote to raise the debt limit that could pass with just the support of the chamber’s 48 Democrats and the two independents allied with them as long as Republicans agreed to allow the vote to occur.

“If Republicans really want to see the debt limit raised without providing a single vote, I’m prepared to hold that vote,” Schumer said on the Senate floor.

But McConnell blocked the vote, saying Democrats should pass the…