A deal to raise the US government’s US$31.4tn debt ceiling is urgently being pushed through the Senate to prevent the world’s largest economy from defaulting on its debt. The House of Representatives has already approved the deal with a 314-117 vote. However, it must pass the Senate and be signed by President Joe Biden before the deadline on June 5th. A default could have severe international consequences, impacting prices and mortgage rates in other countries.
The debt ceiling agreement was reached after weeks of negotiations between President Biden and House Speaker Kevin McCarthy. Both Democratic and Republican leaders are eager to expedite the deal through the Senate. However, some Republicans have threatened to stall the bill’s consideration, potentially calling for amendments if Senate leaders permit.
“I cannot stress enough that we have no margin, no margin, for error,” said Democratic Majority Leader Chuck Schumer. Senate Republican leader Mitch McConnell expressed his support for the deal, stating he would be “proud to support it without delay.”
The debt ceiling deal suspends the spending limit set by Congress until January 1, 2025, and is expected to result in US$1.5tn in savings over a decade, according to the independent Congressional Budget Office. However, the contents of the bill have faced objections from both hard-line Republicans and left-wing Democrats.
In a statement, President Biden thanked House Speaker Kevin McCarthy for negotiating in good faith, acknowledging that “neither side got everything it wanted.” Left-wing Senator Bernie Sanders opposed the bill but assured CNN he would not delay its passage.
The last time the US came close to exceeding its debt ceiling was in 2011, which resulted in the credit agency Standard & Poor’s downgrading the country’s rating, a decision that has not been reversed.
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