By voting to raise the debt ceiling, the US Senate avoids a crisis
Image credit: CNBC
The US Senate has decided to temporarily lift the country’s debt ceiling, averting a historic default that would have wreaked havoc on the economy, according to analysts.
Senators decided to raise the cap by $480 billion (£352 billion), covering the United States until early December.
Following weeks of party bickering, the law was adopted by a 50-48 vote.
The discovery came fewer than two weeks before the United States was poised to become the first country in history to be unable to borrow money or repay loans.
The bill must now pass the House of Representatives before being delivered to President Joe Biden for signature into law.
After Republican Senate leader Mitch McConnell expressed his support for a short-term extension, the vote in the upper house took place.
Because Democrats control the White House and both chambers of Congress, Senate Republicans have previously stated that lifting the debt ceiling is their “sole responsibility.”
They are irritated by new spending proposals proposed by Democrats without Republican support, and Mr. McConnell tweeted last month that his party will “not permit another irresponsible, political taxing and spending spree.”
After the vote, Senate Majority Leader Chuck Schumer said Republicans had “played a dangerous and risky partisan game.”
Because the US government spends more than it gets in taxes, it must borrow to make up the difference.
Borrowing is done through the US Treasury, which issues bonds. US government bonds are regarded as one of the safest and most reliable investments in the world.
In 1939, Congress placed a “ceiling” on the amount of debt the government could accumulate in the year.
The debt ceiling has been raised over 100 times to allow the government to borrow more money. It is frequently the subject of bipartisan action in Congress, and it is rarely the source of a political impasse.
However, several Republicans have expressed displeasure with new Democratic spending pledges.
Democrats have argued that lifting the debt ceiling is about paying off existing debts rather than incurring new ones, and that President Biden’s policies have only contributed to 3% of existing debts.