US Senate approves temporary lift to debt cap, averting default

Once a routine matter, raising the US debt cap has become politically treacherous. Photo / AP

The US Senate dodged a debt disaster Thursday night (local time), voting to extend the government's borrowing authority into December and temporarily avert an unprecedented federal default that experts warned would devastate the economy and harm millions of Americans.

The party-line Democratic vote of 50-48 in support of the bill to raise the government's debt ceiling by nearly a half-trillion dollars brought instant relief in Washington and far beyond. However, it provides only a reprieve. Assuming the US House of Representatives goes along, which it will, Republican and Democratic lawmakers will still have to tackle their deep differences on the issue once more before yearend.

That debate will take place as lawmakers also work to fund the federal government for the new fiscal year and as they keep up their bitter battling over President Joe Biden's top domestic priorities — a bipartisan infrastructure plan with nearly US$550 billion in new spending as well as a much more expansive, US$3.5 trillion effort focused on health, safety net programmes and the environment.

Easing the crisis at hand — a disastrous default looming in just weeks — the Republican Senate leader, Mitch McConnell of Kentucky, offered his support for allowing a short-term extension of the government's borrowing authority after leading solid GOP opposition to a longer extension. He acted as Biden and business leaders ramped up their concerns that a default would disrupt government payments to millions of Americans and throw the nation into recession.

The GOP concession to give up its blockade, for now, was not popular with some members of McConnell's Republican caucus, who complained that the nation's debt levels are unsustainable.

"I can't vote to raise this debt ceiling, not right now, especially given the plans at play to increase spending immediately by another US$3.5 trillion," Senator Mike Lee of Utah said shortly before the vote.

Senator Ted Cruz of Texas said the Democrats had been on "a path to surrender" on the process used to lift the debt cap, "and then unfortunately, yesterday, Republicans blinked".

But Senator Lisa Murkowski of Alaska was among those voting to end debate and allow a vote on the bill.

"I'm not willing to let this train go off the cliff," she said.

Eleven Republicans voted to end debate, providing the threshold needed to move the bill to a final vote. However, no Republicans sided with Democrats in the final vote for the measure. McConnell has insisted that the majority party will have to increase the debt ceiling on its own.

Senator Lisa Murkowski leaves the chamber during a vote at the Capitol in Washington. Photo / AP

Congress has just days to act before the October 18 deadline after which the Treasury Department has warned it will quickly run short of funds to handle the nation's already accrued debt load.

The House is likely to return to approve the measure next week.

Republican leaders worked through the day to find the 10 votes they needed from their party to advance the debt limit extension to a final vote, holding a private huddle late in the afternoon. It was a long and "spirited" discussion in the room, said Senator Josh Hawley of Missouri.

McConnell allowed for an airing of all views and ultimately told the senators he would be voting yes to limit debate.

The vote started with McConnell and South Dakota Senator John Thune, the second-ranking Republican, waiting patiently as slowly, but surely, nine of their GOP colleagues came and gave the anticipated thumbs up. When Cruz voted no, McConnell joked: "I thought you were undecided. Thanks for showing up."

The White House signalled Biden's support, with principal deputy press secretary Karine Jean-Pierre saying the President would sign a bill to raise the debt limit when it passed Congress. Jabbing the Republicans, she also said, "It gives us some breathing room from the catastrophic default we were approaching because of Senator McConnell's decision to play politics with our economy."

Wall Street rallied modestly Thursday on news of the agreement.

US Senate Minority Leader Mitch McConnell leaves the chamber after speaking at the Capitol in Washington. Photo / AP

The accord sets the stage for a sequel of sorts in December, when Congress will again face pressing deadlines to fund the government and raise the debt limit before heading home for the holidays.

The US$480 billion increase in the debt ceiling is the level that the Treasury Department has said is needed to get safely to December 3.

"I thank my Democratic colleagues for showing unity in solving this Republican-manufactured crisis," said Senate Majority Leader Chuck Schumer of New York. "Despite immense opposition from Leader McConnell and members of his conference, our caucus held together and we have pulled our country back from the cliff's edge that Republicans tried to push us over."

McConnell saw it quite differently.

"The pathway our Democratic colleagues have accepted will spare the American people any near-term crisis, while definitively resolving the majority's excuse that they lacked time to address the debt limit through [reconciliation]," McConnell said Thursday. "Now there will be no question: They'll have plenty of time.

McConnell and fellow Senate Republicans still insist that the Democrats go it alone to raise the debt ceiling longer term. Further, McConnell has insisted that Democrats use the same cumbersome legislative process called reconciliation that they used to pass a US$1.9 trillion Covid-19 relief bill and have been employing to try to pass Biden's US$3.5 trillion measure to boost safety net, health and environmental programmes.

On Wednesday, Biden had enlisted top business leaders to push for immediately suspending the debt limit, saying the approaching deadline created the risk of a historic default that would be like a "meteor" that could crush the US economy and send waves of damage worldwide.

At a White House event, the President shamed Republican senators for threatening to filibuster any suspension of the US$28.4 trillion cap. He leaned into the credibility of corporate America — a group that has traditionally been aligned with the GOP on tax and regulatory issues — to drive home his point as the heads of Citi, JP Morgan Chase and Nasdaq gathered in person and virtually to say the debt limit must be lifted.

"It's not right and it's dangerous," Biden said of the resistance by Senate Republicans.

Once a routine matter, raising the debt limit has become politically treacherous over the past decade or more, used by Republicans, in particular, to rail against government spending and the rising debt load.