US Senate passes bipartisan debt deal avoiding potential first-ever default

Issued by: 02/06/2023 – 05:08

The Senate voted 63-36 to approve the bill that passed the House of Representatives on Wednesday, as lawmakers raced against the clock after months of partisan fighting between Democrats and Republicans.

The Treasury Department has warned that it will not be able to pay all of its bills by June 5 if Congress fails to act by then.

“We are avoiding default tonight,” Senate Majority Leader Chuck Schumer said Thursday as he shepherded the legislation through his 100-member chamber.

Before the vote, senators hammered out nearly a dozen amendments — rejecting all of them — before a final vote that sent the bill to Biden for signature into law before Monday’s deadline. .

With this legislation, the statutory limit on federal borrowing will be suspended until January 1, 2025.

Schumer and his counterpart Republican Minority Leader Mitch McConnell expressed their promise to do everything they can to speed up the bill negotiated by Biden and Republican House Speaker Kevin McCarthy.

“America can breathe a sigh of relief,” Schumer said in remarks to the Senate.

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Spending cuts

Republicans have blocked passage of any increase in the debt limit until they have locked in some broad spending cuts in a move they say will begin to address a rapidly rising national debt.

Instead, Biden pushed for tax increases on the wealthy and corporations to help address the growing debt. Republicans refuse to consider any kind of tax increase.

Both parties have kept the expanding Social Security and Medicare retirement and health care programs from cuts, and McCarthy has refused to consider reducing spending on the military or veterans.

That leaves a relatively narrow group of local “discretionary” programs to bring about drastic spending cuts. In the end, Republicans won about $1.5 trillion in cuts over 10 years, which may or may not be fully implemented. Their opening bid was $4.8 trillion raised over a decade.

The Treasury technically hit the borrowing limit in January.

It has since been using “extraordinary measures” to raise the money needed to pay government bills.

Biden, Treasury Secretary Janet Yellen and congressional leaders all acknowledged that triggering a debt default due to a lack of funding would have serious consequences. That includes sending shock waves through global financial markets, potentially triggering job losses and a recession in the United States and raising interest rates among families on everything from home mortgages to credit card debt. .

Schumer drove the point home even as he pointed the bill toward the final passage.

A default, he said, “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.”

The Republican-controlled House passed the bill Wednesday night by a vote of 314-117. Most of those who voted against the bill were Republicans.

“Time is a luxury the Senate doesn’t have,” Schumer said Thursday. “Any unnecessary delay or any last-minute holdup is an unnecessary and even dangerous risk.”

Among the changes being debated are forcing deeper spending cuts than those in the House-passed bill and stopping the fast-track final approval of an energy pipeline in West Virginia.

Weeks of negotiations

Republican Senator Roger Marshall has offered an amendment to impose new border controls as more immigrants arrive at the US-Mexico border. His measure, he said, “will stop the culture of lawlessness on our southern border.”

The Senate defeated the amendment, however. Democrats say it would remove protections for child migrants and rob American farmers of much-needed workers.

Some Republicans also want to boost defense spending beyond the level increases contained in the House-passed bill.

In response, Schumer said the spending limits in this legislation would not prevent Congress from approving more money for emergencies, including helping Ukraine in its fight against Russia.

“This debt ceiling deal does nothing to limit the Senate’s ability to appropriate emergency supplemental funding to ensure our military capabilities are sufficient to deter China, Russia and our other allies. enemy, and responding to ongoing and growing threats to national security, including Russia’s vicious ongoing war. aggression against Ukraine,” Schumer said.

The bill was put together over weeks of intensive negotiations between senior aides to Biden and McCarthy.

The main argument is spending for the next couple of years on discretionary programs such as housing, environmental protection, education and medical research that Republicans want to cut significantly.

The nonpartisan Congressional Budget Office estimates the bill would save $1.5 trillion over 10 years. That’s less than the $3 trillion in deficit reduction, mostly through new taxes, that Biden has proposed.

The last time the United States came close to default was in 2011. That standoff roiled financial markets, leading to the first-ever downgrade of the government’s credit rating and raising the country’s borrowing costs.

There will be little drama this time because it became clear last week that Biden and McCarthy will seek an agreement with enough bipartisan support to get through Congress.

(REUTERS)