US senators cast their votes to suspend the federal debt limit, effectively removing the risk of a devastating credit default, just four days before the Treasury’s deadline.
As reported by AFP, US President Joe Biden said that the debt deal is a ‘big win’ for the economy and Americans.
US senators made the decision to temporarily suspend the federal debt limit, bringing an end to intense negotiations aimed at preventing a catastrophic credit default. This crucial action occurred just four days before the deadline set by the Treasury, as economists had cautioned that the country might exhaust its funds to meet financial obligations by Monday.
The successful passage of the Fiscal Responsibility Act, which extends the government’s borrowing capacity until 2024 while reducing federal expenditures, has alleviated concerns about potential delays.
After extensive negotiations between Democratic President Joe Biden and Republicans, the bipartisan proposal was finalized and approved by the Senate with a significant majority of 63 votes to 36. The passage in the Senate came just a day after it smoothly cleared the House of Representatives.
“America can breathe a sigh of relief because in this process we are avoiding default. From the start, avoiding default has been our North Star,” Democratic Senate Majority Leader Chuck Schumer said.
“The consequences of defaulting would be catastrophic… But, for all the ups and downs and twists and turns it took to get here, it is so good for this country that both parties have come together at last to avoid default.”
Following a day filled with vigorous discussions and negotiations, the bill is now set to be sent to President Biden for his signature, officially becoming law. Throughout the day, party leaders and members engaged in intense deliberations, and some last-minute concerns were raised that could have impeded the swift passage of the bill.
Senators proposed 11 modifications to the 99-page text, with numerous objections raised regarding funding allocations for specific projects, such as border control, Chinese trade, taxation, and the environment. Each modification necessitated a separate vote. At one stage, defence advocates, dissatisfied with the limitation on Pentagon spending to President Biden’s requested budget of $886 billion, even threatened to completely obstruct the bill’s passage.
Democratic leaders had been emphasizing for months the catastrophic consequences that would result from the country’s first-ever default. These consequences included the potential loss of millions of jobs and $15 trillion in household wealth, as well as heightened expenses for mortgages and other forms of borrowing.
The United States spends more money than it generates through taxation, leading to the need to borrow funds by issuing government bonds, which are considered highly dependable investments globally.
Approximately 80 years ago, legislators implemented a restriction on the maximum amount of federal debt that could be accumulated.
Kevin McCarthy, the leading legislator in the Republican-controlled House, had presented the bill he had spent weeks negotiating as a significant triumph for conservatives. However, he encountered opposition from hardline members on the right.
Despite promising to secure 150 votes, which would constitute two-thirds of his party, McCarthy fell just one vote short in the lower chamber. To overcome the right-wing rebellion, he had to rely on support from Democratic members to move the bill forward to the Senate.