US senators voted to suspend the federal debt limit Thursday (Friday, Manila time), capping weeks of fraught negotiations to eliminate the threat of a disastrous credit default just four days ahead of the deadline set by the Treasury.
Economists had warned the country could run out of money to pay its bills by Monday—leaving almost no room for delays in enacting the Fiscal Responsibility Act, which extends the government’s borrowing authority through 2024 while trimming federal spending.
Hammered out between Democratic President Joe Biden and the Republicans, the measure passed the Senate with a comfortable majority of 63 votes to 36 a day after it had sailed through the House of Representatives.
“No one gets everything they want in a negotiation, but make no mistake: this bipartisan agreement is a big win for our economy and the American people,” Biden said in a statement posted to social media.
He said he would sign the bill “as soon as possible” and address the nation Friday.
Democratic Senate Majority Leader Chuck Schumer added that the nation could “breathe a sigh of relief” after avoiding a “catastrophic” economic collapse.
“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,” he said.
The bil—which now heads to Biden’s desk to be signed into law—ended a day of intense back-and-forth between party leaders and rank-and-file members who had threatened the bill’s quick passage with last-minute gripes about the details.
Democratic leaders had spent months underlining the havoc that a first default in history would have wrought, including the loss of millions of jobs and $15 trillion in household wealth, as well as increased costs for mortgages and other borrowing.
The late evening drama came after a series of failed ballots on amendments sought mainly by Republicans who were threatening at one point to hold up the process, dragging it deep into the weekend.
Senators elected to offer 11 tweaks to the 99-page text, many objecting to funding levels for their pet projects—from border control and Chinese trade to taxation and the environment—and each requiring a vote.
Defense hawks, upset at Pentagon spending being capped at Biden’s budget request of $886 billion, threatened at one point to derail the bill’s passage entirely. In the end, they fell in line after being offered a commitment to a separate bill providing cash for Ukraine’s defense against the Russian invasion, and promoting US national security interests in the Middle East and in the face of Chinese aggression against Taiwan.
“As currently written, this bill puts our military behind the eight ball… The first and most important dollars we allocate each year in the budget are those to protect and defend the United States and our interests,” said South Carolina Republican Lindsey Graham.
America spends more money than it collects through taxation, so it borrows money via the issuing of government bonds, seen as among the world’s most reliable investments.
Around 80 years ago, lawmakers introduced a limit on how much federal debt could be accrued.
The ceiling has been raised more than 100 times since to allow the government to meet its spending commitments—usually without drama and with the support of Democrats and Republicans—and stands ataround $31.5 trillion.
Both parties see raising the debt limit as politically toxic, although they acknowledge that failure to do so would plunge the US economy into a depression and roil world markets as the government missed debt repayments.
Republicans hoped to weaponize the extension to campaign against what they see as Democratic overspending ahead of the 2024 presidential election, although hikes in the debt ceiling only cover commitments already made by both parties.
Kevin McCarthy, the top lawmaker in the Republican-led House, had touted the bill he spent weeks negotiating as a big victory for conservatives, although he faced a backlash from hardliners on the right who said he made too many concessions on spending cuts.
He fell one short of the 150 votes—two-thirds of his caucus—he had promised to deliver in the lower chamber as he fought to quell a right-wing rebellion, and needed Democratic help to advance the bill to the Senate.
On the other end of Pennsylvania Avenue, the vote was being touted as a major victory for Biden, who managed to protect almost all his domestic priorities from deep cuts threatened by Republicans.
“This legislation protects the full faith and credit of the United States and preserves our financial leadership, which is critical to our economic growth and stability,” said US Treasury Secretary Janet Yellen.