US senators on Tuesday struck a deal to create a one-time law allowing Democrats to lift the nation’s borrowing authority and avert a credit default without requiring votes from Republicans.
The US House of Representatives approved the fix in an evening vote and it is expected to be approved by the US Senate in the next few days, allowing lawmakers to avert the crisis with a simple 51-vote majority in the upper chamber.
The Bipartisan Policy Center last week said that it expected the US would no longer be able to meet its debt repayment obligations between Dec. 21 and Jan. 28.
US Secretary of the Treasury Janet Yellen has put the deadline even earlier — Wednesday next week.
“Nobody wants to see the US default on its debts,” Senate Majority Leader Chuck Schumer said on the floor of the chamber. “As Secretary Yellen has warned, a default could eviscerate everything we’ve done to recover from the COVID[-19] crisis.”
“We don’t want to see that, I don’t believe we will see that, and I continue to thank all my colleagues for cooperating in good faith to preserve the full faith and credit of the United States,” Schumer said.
The US spends more money than it collects through taxation, so it borrows money via the issuing of government bonds, which are seen as among the world’s most reliable investments.
About 80 years ago, lawmakers introduced a limit on how much federal debt could be accrued.
The ceiling has been lifted dozens of times to allow the government to meet its spending commitments and stands at about US$29 trillion.
Democratic leaders have spent weeks underlining the havoc that a default would have wrought, including the loss of an estimated 6 million jobs and US$15 trillion in household wealth, as well as increased costs for mortgages and other borrowing.
However, Republicans in both chambers of Congress initially objected to helping raise the limit this time, saying that they refused to support US President Joe Biden’s “reckless” taxing and spending plans.
Under the complex, multi-step compromise proposed on Tuesday, the Republicans can essentially stand on the sidelines, offering help to create the new law, but offering no votes to increase the limit.
Congress would have to specify the exact dollar amount of a new borrowing cap — likely upward of US$30 trillion.
After the Senate has followed the House in approving the new process, both chambers are expected to pass the extension by simple majority votes ahead of the deadline.
Senate Minority Leader Mitch McConnell is backing the process.
“I think this is in the best interest of the country, by avoiding default,” McConnell told reporters when questioned about the convoluted approach.
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