LDN - Business

Deal to avert U.S. default, raise debt limit faces test in Senate

[December 09, 2021] By Richard Cowan

WASHINGTON (Reuters) - A deal between the top Democrat and Republican in the U.S. Senate to help raise the federal government's $28.9 trillion debt limit will be tested on Thursday when the full chamber votes on whether to approve the measure.

The House of Representatives on Tuesday approved an unusual bill, agreed to by Senate Majority Leader Chuck Schumer and Minority Leader Mitch McConnell, to sidestep the Senate's "filibuster" rule and ultimately raise federal borrowing authority by a simple majority vote.

That deal comes just two months after Congress agreed on a short-term lift to the debt ceiling, to avert an unprecedented default by the federal government on its obligations, which would have catastrophic implications for the world economy.

Republicans have been trying to withhold their votes for more borrowing authority, contending the increase would smooth the way for passage of President Joe Biden's $1.75 trillion "Build Back Better" domestic investment bill, which they oppose.

Democrats note that the legislation is needed to finance debt largely incurred during Donald Trump's administration, when Republicans willingly jacked up Washington's credit card bill by about $7.85 trillion, partly through sweeping tax cuts and spending to fight the COVID-19 pandemic.

"Soon we'll be able to cross off another major item off our December to-do list," Schumer said on Wednesday, referring to the upcoming debt limit legislation.

But some Senate Republicans, looking to score political points by blaming Democrats for spending, objected to the deal. Republicans contend that "irresponsible," "socialist" spending pushed by Biden is fueling the need for the debt limit increase.

Treasury Secretary Janet Yellen has urged Congress to act by Dec. 15, and the Bipartisan Policy Center think thank warned last week that the government could risk default by late this month if Congress does not act.

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The U.S. Capitol building is seen in Washington, U.S., November 16, 2021. REUTERS/Elizabeth Frantz/File Photo

Democrats noted that they had voted in the past to authorize debt ceiling hikes to cover Republican measures, such as the Trump tax cuts.

FIRST STEP

If the Senate passes the measure allowing a simple majority vote to raise the borrowing limit, both chambers will have to vote on another piece of legislation to actually lift the debt limit.

The draft bill still must plug in a dollar amount for the new statutory debt limit, which likely is being calibrated to give the government enough borrowing authority to extend beyond next November's congressional elections.

If Thursday's vote fails, lawmakers will have to scramble to find a backup plan.

"Every single Senate Democrat will have to put their name to the gigantic dollar amount of debt they’re prepared to pile on the American people," McConnell said in a speech on Wednesday.

Democrats insist their domestic spending initiatives would be paid for largely by tax increases on the wealthy and would expand healthcare for the elderly, help poor children and address urgent climate change programs.

If the Senate on Thursday passes the first step in the process with at least 10 Republicans joining the 50 Democrats and independents, it then goes to Biden for signing into law. Schumer then intends to pass the debt-limit implementing bill before next Wednesday.

(Reporting by Richard Cowan, David Morgan and Susan Cornwell; Editing by Scott Malone and Peter Cooney)

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