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US House Passes Bill To Suspend Debt Ceiling
With a vote of 314-117, the Republican-controlled House sent the bill to the Senate, which needs to pass it and deliver it to President Joe Biden's desk before the approaching Monday deadline
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The US House of Representatives, despite being divided on the issue, approved a bill on Wednesday to temporarily suspend USD 31.4 trillion debt ceiling. The legislation garnered support from both Democrats and Republicans, overcoming resistance from hardline conservatives and averting a potentially disastrous default.
With a vote of 314-117, the Republican-controlled House sent the bill to the Senate, which needs to pass it and then deliver it to President Joe Biden's desk before the deadline of forthcoming Monday, when the federal government is projected to exhaust its funds for bill payments.
Following the vote, President Biden expressed his satisfaction, stating, "This agreement is positive news for the American people and the American economy. I urge the Senate to expedite its passage so that I can sign it into law."
The bill, which is a compromise between President Biden and House Speaker Kevin McCarthy, faced opposition from 71 hardline Republicans. Normally, this level of opposition would be sufficient to block partisan legislation, but with the backing of 165 Democrats (more than the 149 supporting Republicans), the measure was successfully pushed through.
The House of Representatives is controlled by Republicans, but with a slim majority of 222-213.
The legislation temporarily suspends the federal government's borrowing limit until 1 January 2025. This timeline allows President Biden and Congress to set aside this politically sensitive issue until after the presidential election in November 2024.
Additionally, the bill includes provisions to cap certain government expenditures over the next two years, expedite the permitting process for specific energy projects, reclaim unused COVID-19 funds, and expand work requirements for additional recipients of food aid programs.
Hardline Republicans had desired more substantial spending cuts and stricter reforms. Representative Chip Roy, a prominent member of the hardline House Freedom Caucus, criticized the bill, stating, "At best, we have a two-year spending freeze that's full of loopholes and gimmicks."
Progressive Democrats, who, along with President Biden, had resisted negotiations on the debt ceiling, oppose the bill for various reasons, including the introduction of new work requirements for certain federal anti-poverty programs. Democratic Representative Jim McGovern expressed his opposition, saying, "Republicans are forcing us to decide which vulnerable Americans get to eat or they'll throw us into default. It's just plain wrong."
Late on Tuesday, the non-partisan Congressional Budget Office stated that the legislation would lead to USD 1.5 trillion in savings over the course of a decade. This figure falls short of the USD 4.8 trillion in savings targeted by Republicans in a bill they passed through the House in April and is also lower than the USD 3 trillion in deficit reduction that President Biden's proposed budget would have achieved during that period through new taxes.
On To The Senate
Both Democratic and Republican leaders in the Senate expressed their hope to pass the legislation before the weekend. However, the potential for delays in amendment votes could complicate the process.
Republicans argued that Senate Majority Leader Chuck Schumer and Senate Minority Leader Mitch McConnell might need to allow votes on Republican amendments to ensure swift action. Schumer, however, seemed to reject amendments, stating to reporters, "We cannot send anything back to the House, plain and simple. We must avoid default."
Debates and voting in the Senate could extend into the weekend, particularly if any senator tries to slow down the process. Notably, hardline Republican Senator Rand Paul, known for delaying Senate votes, stated that he would not impede passage if given the opportunity to propose an amendment for a floor vote.
Senator Bernie Sanders, a progressive independent aligned with the Democrats, announced his opposition to the bill due to the inclusion of an energy pipeline and additional work requirements. Sanders expressed on Twitter, "I cannot, in good conscience, vote for the debt ceiling deal."
The bill includes a provision that redirects some funding away from the Internal Revenue Service, although the White House assures that it will not undermine tax enforcement.
President Biden can claim some victories as well. The deal largely preserves his key infrastructure and green-energy laws, and the spending cuts and work requirements are significantly less than what Republicans had initially sought.
Republicans have argued that significant spending cuts are necessary to control the growth of the national debt, which stands at approximately USD 31.4 trillion, roughly equivalent to the annual economic output.
Government forecasts indicate that interest payments on the debt will consume a larger portion of the budget as the aging population drives up healthcare and retirement costs. However, the deal does not address the need to rein in these rapidly growing programs.
Most of the savings would come from capping spending on domestic programs such as housing, education, scientific research, and other discretionary expenses. Military spending would be allowed to increase over the next two years.
The debt-ceiling impasse has prompted ratings agencies to issue warnings of a possible downgrade of US debt, which serves as the foundation of the global financial system.
Credit rating agency DBRS Morningstar recently placed the United States under review for a potential downgrade, joining similar warnings from Fitch, Moody's, and Scope Ratings.
In a previous debt-ceiling standoff in 2011, during a similar partisan divide with a Democratic president, Senate majority, and a Republican-majority House, another agency, S&P Global, downgraded US debt.