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Deal to raise debt ceiling passes US Senate, heads to Biden | Debt News

Deal to raise debt ceiling passes US Senate, heads to Biden | Debt News

The United States Senate has voted to pass a bipartisan deal that would increase the country’s debt ceiling, clearing the last major hurdle for the bill before it reaches President Joe Biden’s desk.

With Biden expected to sign the newly passed bill, Thursday’s decision is set to avert economic catastrophe, with only days remaining before the US was due to default on its debt on June 5.

The Senate’s decision on the debt-ceiling deal was preceded by a series of rapid-fire votes – limited to 10 minutes apiece – on the numerous amendments that had been raised, with 60 yeas needed for the passage of each one.

Senate leaders push support for deal

In the lead-up to Thursday’s vote, Senate Majority Leader Chuck Schumer and Minority Leader Mitch McConnell rallied support from their respective parties to back the deal, which would suspend the federal borrowing limit until January 2025.

On the Senate floor, Schumer, a Democrat, invoked the bill’s bipartisan success in the House of Representatives on Wednesday as a model for the upper chamber to aspire to.

“Last night’s House vote was a resounding affirmation of bipartisanship,” Schumer said, pointing to Wednesday’s 314-to-117 tally in favour of the debt-ceiling deal.

But the margins for success were narrower in the 100-member Senate, where Democrats hold a razor-thin 51-seat majority. Senators on both sides of the aisle came out against the bill, calling for amendments on everything from military spending to pipeline construction.

However, speaking to his Senate colleagues on Thursday, Schumer promised that the Senate would stay in session until a bill was passed, emphasising that the default date was a mere four days away.

“We will keep working until the job is done. Time is a luxury the Senate does not have if we want to prevent default,” Schumer said. He also blasted calls for changes to the deal’s language.

“At this point, any needless delay or any last-minute hold-ups would be an unnecessary and even dangerous risk. And any change to this bill that forces us to send it back to the House would be entirely unacceptable. It would almost guarantee default.”

Concessions a selling point for Republicans

Meanwhile, McConnell, Schumer’s Republican counterpart, played up the conservative bona fides of the bill for a party starkly divided over its merits.

“The Fiscal Responsibility Act avoids the catastrophic consequences of a default on our nation’s debt. And just as importantly, it makes the most serious headway in years toward curbing Washington Democrats’ reckless spending addiction,” McConnell told the Senate.

On Tuesday, the Congressional Budget Office estimated that the federal government’s budget deficit could be reduced by $1.5 trillion through 2033 under the terms of the debt-ceiling deal.

That reduction would come primarily through the deal’s caps on non-military discretionary spending, which would be kept flat in 2024 and increased by only one percent in 2025. The bill would also claw back unused COVID relief money and funds previously awarded to the Internal Revenue Service (IRS), the government’s tax-collecting body.

The deal would also force the government to resume collecting payments from federal student loans, something that had been suspended during the COVID pandemic.

Senate Minority Leader Mitch McConnell has faced opposition to the debt-ceiling deal from far-right segments of his party [J Scott Applewhite/AP Photo]

Debate over military spending

But Senate Republicans on Thursday came out strongly against the military spending allocated in the deal, arguing that it was too low to allow the US to compete on the global stage.

The debt-ceiling deal proposes to cap military expenditures at $886bn for fiscal 2024, a three-percent increase over this year. For the last fiscal year, 2022, the US spent $877bn on defence – the largest military budget of any country in the world.

Still, Senators like Maine’s Susan Collins and Arkansas’s Tom Cotton pointed out that the defence spending increase in the deal would be outpaced by inflation – a threat, they said, to US military might.

“This is not a threat-based budget. This is a budget of political compromise for people who have lost sight of what the country needs. We need safety and security,” Senator Lindsey Graham of South Carolina said in an impassioned speech. “Don’t tell me that a defence budget that is $42bn below inflation fully funds the military.”

Initially, Graham and other hawkish Republicans asserted that the Senate would keep debating until Tuesday unless more money was allocated to bolster the military and support Ukraine as it faces Russian invasion.

But afterwards, Graham returned to the floor to encourage Senate leadership to pursue a supplement to address concerns over military spending later this year. And Schumer took the podium himself in the midst of the amendment votes to speak directly to the criticism.

“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,” Schumer said.

In a yellow room, Tim Kaine speaks to reporters in a dark suit, his arms outspread.
Senator Tim Kaine, a Democrat, attempted to add an amendment to block a pipeline included in the debt-ceiling bill [J Scott Applewhite/AP Photo]

Concerns from the left

More criticism was raised on the Senate floor by Virginia Democrat Tim Kaine, who objected to the inclusion of the Mountain Valley Pipeline in the debt-ceiling deal.

The 489-kilometre (304-mile) natural gas pipeline has been controversial in Kaine’s state, with protests launched to stop its construction from cutting through the Appalachian forest and private property alike.

“It would have been my intention to be a supporter of the deal despite its imperfections,” Kaine said, citing the pipeline as his main objection.

He introduced an amendment to strip the bill of the pipeline language.

“When you do a pipeline project and you approve it and you give a private company the right to take people’s land, you ought to do it carefully after significant deliberation.”

And on Wednesday, Vermont Senator Bernie Sanders posted on Twitter that he would be voting “no” on the deal to protest the burdens he said it would place on the poor and middle class.

“I will be voting no on the debt limit deal because you do not do deficit reduction on the backs of Americans who are already struggling,” he wrote.

With Air Force One plane behind him, President Joe Biden walks across the tarmac, surrounded by men in suits.
US President Joe Biden – seen here in Colorado Springs, Colorado, on Wednesday – was one of the architects behind the debt-ceiling agreement [Kevin Lamarque/Reuters]

A deal long in the making

The hotly scrutinised debt-ceiling deal was the product of tense, often late-night negotiations between teams representing the Democratic Biden and Republican House Speaker Kevin McCarthy – two figures often at odds.

But almost as soon as it was announced on May 27, the 99-page deal was controversial on both sides of the political spectrum.

Democrats decried de facto budget cuts likely to affect social safety net initiatives. They also objected to additional work requirements added to the Supplemental Nutrition Assistance Program (SNAP), known as food stamps, as well as the Temporary Assistance for Needy Families (TANF) programme.

Republicans, meanwhile, denounced the fact that the spending cuts were not as steep as originally hoped.

A previous 320-page bill – passed by the Republican-led House in April but threatened with a White House veto – would have slashed government spending and imposed a stricter limit on the debt-ceiling increase, lifting it by $1.5 trillion for about a year. It would have also taken aim at signature elements of Biden’s domestic policy, including tax credits for clean energy initiatives.

The Biden-McCarthy debt-ceiling agreement, however, was positioned as a compromise. It pared back some of the conditions Republicans placed on lifting the debt ceiling – while the Biden White House retreated from its initial demand for a “clean” increase, with no strings attached.

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