On Tuesday, members of Congress returned to Washington to approve a temporary lift in the nation’s debt limit. This will allow the federal government to continue paying its bills fully into December.
On a party-line vote, the Senate approved the $480 billion increase to the country’s borrowing limit. It is expected that the House will approve it quickly so President Joe Biden can sign into law this week. Janet Yellen, Treasury Secretary, had warned that the steps taken to prevent default on the country’s debts would run out by Monday and that the department would soon find it impossible to meet its financial obligations.
Global financial markets, which are built on the foundation of U.S. debt, would be severely affected by a default. Routine payments by the government to Social Security beneficiaries, disabled veterans, and active-duty military personnel could also be questioned.
“It’s egregious that our country has been placed in this spot, and we must immediately take action to address the debt limit, and ensure the full faith, credit, and safety of the United States,” stated House Majority Leader StenyHoyer, D.Md.
The bill’s passage is temporary and Congress will have to reconsider the issue in December. This will be a time when Congress will be working to finish federal spending bills and avoid a shutdown. Both parties face risks from the year-end backlog, which could lead to a turbulent close to Biden’s first year as president.
Senate Republican leader Mitch McConnell (R-Ky.), agreed to assist in passing the short-term debt ceiling increase. He insists that he will not do it again.
McConnell sent a Friday letter to Biden stating that Democrats would have to manage the next debt limit increase using the same process they used to pass Biden’s huge social spending plan and environment plan. Reconciliation allows legislation to be passed by the Senate with 51 votes instead of the usual 60. With her tiebreaking vote, Vice President Kamala Harris gives Democrats 50-50 split Senate.
McConnell has focused his attention on the debt limit and tried to connect Biden’s large federal spending boost with the nation’s rising debt load. However, they are not separate entities. The debt ceiling must be increased or suspended, regardless of whether Biden’s $3.5 trillion plan is passed into law.
McConnell wrote that “Your Capitol Hill lieutenants now have the time and tools they claimed they needed to address the debt ceiling via standalone reconciliation.” They cannot create another crisis and then ask me for my assistance.”
McConnell was among 11 Republicans that voted with Democrats for the debt ceiling reprieve to be put to a final vote. McConnell and his GOP friends voted against final passage.
A short-term solution was not reached quickly. McConnell was influenced by threats made by Democrats to remove the debt ceiling vote threshold of 60 votes. Some Republican senators claimed that this was a part of McConnell’s decision.
“I can understand why the Republican leadership blinks, but I wish they hadn’t,” stated Sen. Ted Cruz (R-Texas).
Current debt ceiling: $28.4 trillion Both sides have contributed to this load by making decisions that have made it difficult for the government to operate in the black.
Because of the severe consequences of default, lawmakers have been able reach a compromise to lift/suspend the debt cap 18 times since 2002. This was often after many rounds of brinkmanship.
According to Moody’s Analytics, “Global financial markets would collapse and the economy would be reorganized.” A recent Moody’s Analytics report warned that Americans would continue to pay for this default over generations.