In a closely divided vote, the US House of Representatives approved a bill to suspend the $31.4 trillion debt ceiling on Wednesday.
The legislation received support from both Democrats and Republicans, enabling it to overcome opposition from conservative factions and prevent a potentially catastrophic default. The Republican-controlled House voted 314-117 in favor of the bill, which will now proceed to the Senate for enactment before the impending Monday deadline when the federal government is projected to exhaust its funds.
President Joe Biden expressed his satisfaction with the passage of the bill and urged the Senate to quickly pass it to be signed into law. The legislation, a compromise between Biden and House Speaker Kevin McCarthy, faced opposition from 71 hardline Republicans. However, with the backing of 165 Democrats, it managed to surpass the 149 Republican votes in favor and secure passage. The Republican party holds a narrow majority in the House, with a split of 222-213.
The bill effectively suspends the federal government's borrowing limit until January 1, 2025. This timeline allows Biden and Congress to defer addressing this politically sensitive issue until after the 2024 presidential election. Additionally, the legislation imposes spending caps over the next two years, streamlines the permitting process for specific energy projects, reallocates unused COVID-19 funds, and expands work requirements for certain food aid programs.
Hardline Republicans had advocated for more significant spending cuts and stricter reforms, expressing dissatisfaction with the compromise bill. Representative Chip Roy, a prominent member of the conservative House Freedom Caucus, criticised the legislation, describing it as a two-year spending freeze filled with loopholes and gimmicks.
Progressive Democrats, who had initially resisted negotiating on the debt ceiling, oppose the bill due to several reasons, including the introduction of new work requirements for federal anti-poverty programs. Representative Jim McGovern said that Republicans were forcing them to decide which vulnerable Americans should receive assistance or risk default, emphasising the moral dilemma they faced.
The non-partisan Congressional Budget Office estimated that the legislation would result in $1.5 trillion in savings over a decade, significantly lower than the $4.8 trillion savings targeted by Republicans in a bill passed in April. It also falls short of the $3 trillion deficit reduction proposed in Biden's budget through increased taxes over the same period.
The focus now shifts to the Senate, where leaders from both parties hope to expedite the enactment of the bill before the weekend. However, potential delays related to amendment votes could complicate the process. Senate Majority Leader Chuck Schumer and Senate Minority Leader Mitch McConnell may need to allow votes on Republican amendments to ensure swift action. Nevertheless, Schumer seemed to dismiss the possibility of amendments, emphasising the importance of avoiding default.
Senate debate and voting could extend into the weekend, particularly if any senator decides to impede the passage. Senator Rand Paul, known for delaying important Senate votes, expressed his intention not to obstruct the bill's progress if allowed to propose an amendment for a floor vote. Senator Bernie Sanders, a progressive independent who caucuses with the Democrats, announced his opposition to the bill due to the inclusion of an energy pipeline and additional work requirements.
The bill includes provisions that benefit both Republicans and Biden. It retains the major elements of Biden's infrastructure and green-energy legislation while imposing spending cuts and work requirements that are less severe than what Republicans had sought. Republicans argue that substantial spending cuts are necessary to control the growth of the national debt, which currently amounts to approximately the annual economic output of the United States. However, the bill does not address the rising costs of health and retirement programs, which are projected to consume a larger share of the budget due to an aging population.
The debt-ceiling impasse has prompted credit rating agencies to issue warnings about a potential downgrade of US debt, which forms the backbone of the global financial system.