US Congress averts historic default, approves debt-limit suspension
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[June 02, 2023]
By Richard Cowan and Gram Slattery
WASHINGTON (Reuters) - The U.S. Senate on Thursday 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. He said he would make an additional statement on
Friday at 7 p.m. EDT (2300 GMT).
Biden was directly involved in negotiations on the bill with House
Speaker Kevin McCarthy.
While this bitter battle has ended, Senate Republican Leader Mitch
McConnell wasted no time flagging the next budget fight.
"In the coming months, Senate Republicans will continue working to
provide for the common defense and control Washington Democrats’
reckless spending," he said in a statement.
McConnell was referring to 12 bills Congress will work on over the
summer to fund government programs in the fiscal year beginning Oct. 1,
which will also carry out the broad instructions of the debt limit bill.
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.
'TIME IS A LUXURY'
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.
Both parties walled off the sprawling Social Security and Medicare
retirement and healthcare programs from cuts, and McCarthy refused to
consider reducing spending on the military or veterans.
That left a somewhat narrow band of domestic "discretionary" programs to
bear the brunt of spending cuts. In the end, Republicans won about $1.5
trillion in reductions over 10 years, which may or may not be fully
realized. Their opening bid was for $4.8 trillion in savings over a
decade.
Treasury technically hit its limit on borrowing in January. Since then
it has been using "extraordinary measures" to patch together the money
needed to pay the government's bills.
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U.S. Senate Majority Leader Chuck
Schumer (D-NY) holds a press conference after Congress approves a
debt-limit suspension, averting what would have been a first-ever
default, on Capitol Hill in Washington, U.S., June 1, 2023.
REUTERS/Evelyn Hockstein
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.
"Time is a luxury the Senate does not have," Schumer said on
Thursday. "Any needless delay or any last-minute holdups would be an
unnecessary and even dangerous risk."
Among the amendments debated were ones to force deeper spending cuts
than those contained in the House-passed bill and stopping the
speedy final approval of a West Virginia energy pipeline.
COBBLED OVER WEEKS
Republican Senator Roger Marshall offered an amendment to impose new
border controls as high numbers of immigrants arrive at the
U.S.-Mexico border. His measure, he said, would "put an end to the
culture of lawlessness at our southern border."
The Senate defeated the amendment, however. Democrats said it would
strip away protections for child migrants and rob American farmers
of needed workers.
Some Republicans also wanted to beef up defense spending beyond the
increased levels contained in the House-passed bill.
In response, Schumer said the spending caps in this legislation
would not constrain Congress in approving additional money for
emergencies, including helping Ukraine in its battle against Russia.
"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," Schumer said.
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.
(Reporting by Richard Cowan, David Morgan, Moira Warburton and Gram
Slattery; Editing by Scott Malone, Alistair Bell, Diane Craft,
Kieran Murray and William Mallard)
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