The U.S. Senate passed bipartisan legislation backed by President Joe Biden that lifts the government’s $31.4 trillion debt ceiling, averting what would have been a first-ever default. The Senate voted 63-36 to approve the bill that had been passed on Wednesday by the House of Representatives, as lawmakers raced against the clock following months of partisan bickering between Democrats and Republicans.
The Treasury Department had warned it would be unable to pay all its bills on June 5 if Congress failed to act by then. “We are avoiding default tonight,” Senate Majority Leader Chuck Schumer said on Thursday as he steered the legislation through his 100-member chamber.
Biden praised Congress’ timely action. “This bipartisan agreement is a big win for our economy and the American people,” the Democratic president said in a statement, adding that he will sign it into law as soon as possible. Biden was directly involved in negotiations on the bill with House Speaker Kevin McCarthy.
Treasury Secretary Janet Yellen, meanwhile, issued some pointed advice saying, “I continue to strongly believe that the full faith and credit of the United States must never be used as a bargaining chip,” as Republicans did over the past several months. Before the final vote, senators tore through nearly a dozen amendments, rejecting all of them during a late-night session in anticipation of Monday’s deadline.
With this legislation, the statutory limit on federal borrowing will be suspended until Jan. 1, 2025. Unlike most other developed countries, the United States limits the amount of debt the government can borrow, regardless of any spending allocated by the legislature. “America can breathe a sigh of relief,” Schumer said in remarks to the Senate.
Republicans had blocked passage of any debt limit increase until they locked in some wide-ranging spending cuts in a move, they said would begin addressing a rapidly escalating national debt. Biden instead pushed for tax increases on the wealthy and corporations to help address the growing debt. Republicans refused to consider any sort of tax hikes.
Biden, Yellen, and congressional leaders all acknowledged that triggering a default for lack of funds would have serious ramifications. Those included sending shock waves through global financial markets, possibly triggering job losses and a recession in the United States, and raising families’ interest rates on everything from home mortgages to credit card debt.
The Republican-controlled House passed the bill on Wednesday evening in a 314-117 vote. Most of those who voted against the bill were Republicans.
The bill was cobbled together over weeks of intensive negotiations between senior aides for Biden and McCarthy. The main argument was over spending for the next couple of years on discretionary programs such as housing, environmental protections, education, and medical research that Republicans wanted to cut deeply.
The nonpartisan Congressional Budget Office estimated the bill would save $1.5 trillion over 10 years. That is below the $3 trillion in deficit reduction, mainly through new taxes, that Biden proposed.
The last time the United States came this close to default was in 2011. That standoff hammered financial markets, led to the first-ever downgrade of the government’s credit rating, and pushed up the nation’s borrowing costs.
There was less drama this time as it became clear last week that Biden and McCarthy would find a deal with enough bipartisan support to get through Congress.
(With inputs from agencies)
