Senate approves bill to avoid default by raising debt ceiling.

US Senate Passes Bipartisan Bill to Lift Debt Ceiling

“We are avoiding default tonight,” Senate Majority Leader Chuck Schumer said on Thursday as he steered the legislation through his 100-member chamber.

The US Senate has passed a bipartisan bill to lift the government’s $31.4 trillion debt ceiling, averting what would have been a first-ever default. The bill had been passed on Wednesday by the House of Representatives, as lawmakers raced against the clock following months of partisan bickering between Democrats and Republicans. The Treasury Department had warned it would be unable to pay all its bills on June 5 if Congress failed to act by then.

Biden Praises Congress’ Timely Action

President Joe Biden praised Congress’ timely action. “This bipartisan agreement is a big win for our economy and the American people,” the Democratic president said in a statement, adding that he will sign it into law as soon as possible. He said he would make an additional statement on Friday at 7 p.m. EDT (2300 GMT). Biden was directly involved in negotiations on the bill with House Speaker Kevin McCarthy.

Republicans Flag Next Budget Fight

While this bitter battle has ended, Senate Republican Leader Mitch McConnell wasted no time flagging the next budget fight. “In the coming months, Senate Republicans will continue working to provide for the common defense and control Washington Democrats’ reckless spending,” he said in a statement. McConnell was referring to 12 bills Congress will work on over the summer to fund government programs in the fiscal year beginning Oct. 1, which will also carry out the broad instructions of the debt limit bill.

Treasury Secretary Issues Pointed Advice

Treasury Secretary Janet Yellen issued some pointed advice saying, “I continue to strongly believe that the full faith and credit of the United States must never be used as a bargaining chip,” as Republicans did over the past several months.

Statutory Limit on Federal Borrowing Suspended

With this legislation, the statutory limit on federal borrowing will be suspended until Jan. 1, 2025. Unlike most other developed countries, the United States limits the amount of debt the government can borrow, regardless of any spending allocated by the legislature.

Republicans Block Passage of Any Debt Limit Increase

Republicans had blocked passage of any debt limit increase until they locked in some wide-ranging spending cuts in a move they said would begin addressing a rapidly escalating national debt. Biden instead pushed for tax increases on the wealthy and corporations to help address the growing debt. Republicans refused to consider any sort of tax hikes.

Both Parties Walled Off Social Security and Medicare Programs from Cuts

Both parties walled off the sprawling Social Security and Medicare retirement and healthcare programs from cuts, and McCarthy refused to consider reducing spending on the military or veterans. That left a somewhat narrow band of domestic “discretionary” programs to bear the brunt of spending cuts. In the end, Republicans won about $1.5 trillion in reductions over 10 years, which may or may not be fully realized. Their opening bid was for $4.8 trillion in savings over a decade.

Amendments Debated

Before the final vote, senators tore through nearly a dozen amendments – rejecting all of them during a late-night session in anticipation of Monday’s deadline. Among the amendments debated were ones to force deeper spending cuts than those contained in the House-passed bill and stopping the speedy final approval of a West Virginia energy pipeline.

Less Drama This Time

The last time the United States came this close to default was in 2011. That standoff hammered financial markets, led to the first-ever downgrade of the government’s credit rating and pushed up the nation’s borrowing costs. There was less drama this time as it became clear last week that Biden and McCarthy would find a deal with enough bipartisan support to get through Congress.