US Debt Ceiling Suspension: A Bipartisan Move
The US House of Representatives, split along party lines, has passed a bill to temporarily suspend the $31.4 trillion debt ceiling. This bipartisan move, with support from both Democrats and Republicans, aims to avert a potential default and its disastrous consequences.
Detailed information on the agreed deal is available here.
The bill, a compromise between President Biden and House Speaker Kevin McCarthy, faced resistance from 71 hard-line Republicans. Despite this, it garnered enough support with 165 Democrats to secure passage in the Republican-controlled House.
Currently holding a narrow 222-213 majority in the House, Republicans and Democrats collaborated on this legislation, effectively suspending the federal government’s borrowing limit until January 1, 2025. This allows policymakers to defer addressing the politically sensitive issue until after the November 2024 presidential election.
The bill includes provisions to cap specific government spending over the next two years, expedite permitting for certain energy projects, reclaim unused COVID-19 funds, and expand work requirements for additional recipients of food aid programs.
While hard-line Republicans sought more significant spending cuts and stricter reforms, the compromise bill did not fully meet their expectations. Progressive Democrats, along with President Biden, opposed negotiations over the debt ceiling, citing concerns about new work requirements for federal anti-poverty programs.
The nonpartisan Congressional Budget Office projected $1.5 trillion in savings over a decade, falling short of the $4.8 trillion sought by Republicans and the $3 trillion reduction in the deficit proposed by President Biden’s budget through new taxes.
Leaders in the Senate from both parties expressed hope for swift enactment before the weekend, although potential delays related to amendment votes could complicate matters. Some Republicans proposed allowing votes on amendments, while Senate Majority Leader Chuck Schumer emphasized the need to avoid delays to prevent default.
Debates and voting in the Senate could extend into the weekend, with Senator Rand Paul indicating he would not obstruct the bill’s passage if given the opportunity to propose an amendment for a floor vote. However, Senator Bernie Sanders, a progressive independent, announced his opposition to the bill due to the inclusion of an energy pipeline and additional work requirements.
The bill includes a provision redirecting some funding from the Internal Revenue Service, with assurances from the White House that it will not compromise tax enforcement.
President Biden can claim victories, as the deal largely preserves his significant infrastructure and green-energy laws. Republicans argue for significant spending cuts to control the growing national debt, but the compromise bill does not fully address the expansion of fast-growing programs.
The majority of savings in the bill come from capping spending on domestic programs like housing, education, and scientific research. Military spending, however, is permitted to increase over the next two years.
The debt-ceiling standoff prompted credit rating agencies to issue warnings about the potential downgrade of U.S. debt, which is foundational to the global financial system.
Last week, credit rating agency DBRS Morningstar placed the United States under review for a potential downgrade, echoing concerns from Fitch, Moody’s, and Scope Ratings. In 2011, during a similar debt-ceiling standoff, S&P Global downgraded U.S. debt, raising the specter of a potential default.
The United States faced a similar situation in 2011, marked by a partisan divide in Washington with a Democratic president, a Senate majority, and a Republican-majority House.
