2-6-2023 (WASHINGTON) U.S. Senate on Thursday as bipartisan legislation, supported by President Joe Biden, successfully raised the government’s debt ceiling of $31.4 trillion. This move effectively prevented what could have been a historic default.
With a vote of 63-36, the Senate approved the bill that had been passed by the House of Representatives on Wednesday. Lawmakers raced against the clock after months of partisan disagreements between Democrats and Republicans. The Treasury Department had warned that it would be unable to meet all its financial obligations by June 5 if Congress did not take action.
Senate Majority Leader Chuck Schumer expressed relief at avoiding a default and guided the legislation through the 100-member chamber. He stated, “We are avoiding default tonight.”
President Biden commended Congress for their prompt action and hailed the bipartisan agreement as a significant victory for the American people and the economy. In a statement, the Democratic president confirmed his intention to sign the bill into law as soon as possible, adding that he would provide an additional statement on Friday.
Before the final vote, senators debated and rejected nearly a dozen amendments during a late-night session, anticipating the approaching deadline on Monday.
This legislation suspends the statutory limit on federal borrowing until January 1, 2025. Unlike most other developed countries, the United States imposes a cap on government borrowing, irrespective of the spending allocated by the legislature.
Both Schumer and his Republican counterpart, Minority Leader Mitch McConnell, fulfilled their promise to expedite the bill, which had been negotiated by Biden and Republican House Speaker Kevin McCarthy.
Schumer expressed relief and stated, “America can breathe a sigh of relief,” during his remarks in the Senate.
The Republicans had initially blocked any increase in the debt limit until they secured substantial spending cuts, aiming to address the rapidly escalating national debt. In contrast, President Biden advocated for tax increases on the wealthy and corporations to tackle the growing debt. However, Republicans vehemently opposed any form of tax hikes.
To protect Social Security, Medicare, and other retirement and healthcare programs, both parties agreed to safeguard them from budget cuts. McCarthy also refused to consider reductions in military spending or veterans’ benefits. Consequently, the burden of spending cuts fell mainly on domestic “discretionary” programs. Ultimately, Republicans secured approximately $1.5 trillion in reductions over ten years, which may or may not be fully implemented. Their initial proposal aimed for $4.8 trillion in savings over the same period.
Technically, the Treasury reached its borrowing limit in January, utilizing “extraordinary measures” to meet the government’s financial obligations.
Biden, Treasury Secretary Janet Yellen, and congressional leaders all acknowledged the severe consequences that would arise from a debt default. These repercussions included sending shockwaves through global financial markets, potentially leading to job losses and a recession in the United States. Additionally, families could face higher interest rates on mortgages, credit card debts, and other financial obligations.
Schumer emphasized the catastrophic impact of a default and stated, “It would almost certainly cause another recession. It would be a nightmare for our economy and millions of American families. It would take years, years to recover from.”
The Republican-controlled House of Representatives approved the bill on Wednesday evening with a vote of 314-117. Most of the dissenting votes came from Republicans.
Schumer emphasized the urgency in the Senate, stating, “Time is a luxury the Senate does not have. Any needless delay or last-minute holdups would be an unnecessary and even dangerous risk.”
Several amendments were debated, including ones that sought deeper spending cuts beyond those outlined in the House-passed bill and an attempt to halt the expedited approval of a West Virginia energy pipeline.
Republican Senator Roger Marshall proposed an amendment to impose stricter border controls, citing the high number of immigrants arriving at the U.S.-Mexico border. However, the Senate defeated this amendment, with Democrats arguing that it would compromise protections for child migrants and hinder American farmers in need of workers.
Some Republicans also sought to increase defense spending beyond the levels specified in the House-passed bill.
In response, Schumer assured that the spending caps in the legislation would not restrict Congress from allocating additional funds for emergencies, including supporting Ukraine in its conflict with Russia. He stated, “This debt ceiling deal does nothing to limit the Senate’s ability to appropriate emergency supplemental funds to ensure our military capabilities are sufficient to deter China, Russia, and our other adversaries, and respond to ongoing and growing national security threats, including Russia’s evil ongoing war of aggression against Ukraine.”
The bill itself was the product of weeks of intense negotiations between senior aides of President Biden and Kevin McCarthy.
The primary point of contention revolved around the spending for discretionary programs such as housing, environmental protections, education, and medical research. Republicans aimed to make substantial cuts in these areas.
The nonpartisan Congressional Budget Office estimated that the bill would result in $1.5 trillion in savings over a ten-year period. This falls short of the $3 trillion in deficit reduction proposed by Biden, primarily through tax increases.
The last time the United States faced such a close call with default was in 2011. That standoff severely impacted financial markets, led to the nation’s first-ever credit rating downgrade, and raised borrowing costs.
However, this time, as it became evident last week that Biden and McCarthy would secure a deal with sufficient bipartisan support, the situation unfolded with less drama.
