VIRGINIA (BLOOMBERG) - The US House voted on Tuesday to raise the nation's debt ceiling by US$2.5 trillion (S$3.4 trillion), an amount intended to extend the government's borrowing authority past next year's congressional elections and into early 2023.
The 221 to 209 vote sends the Bill to President Joe Biden for his signature. The Senate earlier in the day approved the Bill in a 50-49 vote with only Democrats in support.
"We must lift the debt ceiling to cover expenses already incurred" House Speaker Nancy Pelosi said on Tuesday night. "The full faith and credit of the United States should never be questioned."
The current federal debt is US$28.9 trillion, and Treasury Secretary Janet Yellen had warned that the government could have difficulty meeting its obligations after Dec 15, though outside analysts have said default could possibly be staved off into January.
The resolution of the latest debt stand-off came as a result of legislation Congress approved last week, which included a one-time process to fast-track a debt ceiling increase by shielding it from the threat of a GOP filibuster in the 50-50 Senate and allowing it to pass with a simple majority.
House Republicans lined up to oppose the debt ceiling increase, arguing it should have been tied to spending cuts aimed at eliminating annual budget deficits and paying down the debt.
"The problem isn't whether we should increase our debt limit, it is that we must issue debt at all. Debts are issued to cover the difference between revenues and outlays. When you spend more than you make, you must find a way to pay for that spending," said Mr Michael Burgess, a Texas Republican.
Congress added US$480 billion to the US debt ceiling in October after weeks of partisan sniping that unnerved investors. This time, Senate Majority Leader Chuck Schumer and Minority Leader Mitch McConnell agreed on a process that allows the debt ceiling to be lifted without any Republicans having to vote for it.
Fourteen Republicans voted to advance the one-time provision, which Mr McConnell said would force Democrats to "own" the debt ceiling increase.
"Raising the debt ceiling is not about incurring new debts but rather enabling the federal government to keep its existing commitments. By raising the debt limit, we are meeting our existing obligations to members of the military, veterans and recipients of Medicare, Medicaid and Social Security," Mr Don Beyer, a Virginia Democrat, said on the House floor.
Democrats technically could have increased the debt ceiling by any amount and Republicans would have been powerless to stop passage. Some progressive lawmakers argued that it should have been such a high dollar amount to render the debt limit meaningless.
Senator Dick Durbin, the No. 2 Democrat in the chamber, said the US$2.5 trillion figure was part of the agreement with Republicans to set up the simple-majority vote. A Senate GOP aide said on Tuesday that while there was an understanding with Democrats that the debt limit increase would go past the midterm elections, there was not an agreement ahead of time on a particular number.
The Bill's passage sets up another showdown on the debt ceiling as soon as November 2022. If Democrats lose their majority in the midterm elections they may try to raise the ceiling again to avoid Republicans holding it hostage for spending cuts once Republicans take over. The would be able to do so using a fast-track budget reconciliation procedure.
The debt limit agreement will allow the Treasury to replenish its depleted stockpile of cash and remove the risk of non-payment for government securities. Political wrangling over the issue had seen traders impose discounts on Treasuries maturing in the latter half of December.
Those discounts were rolled back after news of the debt-ceiling plan, with yields on Treasury bills maturing during the second half of December dropping as much as 5 basis points. Democrats successfully rebuffed GOP efforts to force them to resort to the budget reconciliation process - which they used for a March pandemic-relief Bill and are deploying for a US$1.6 trillion social-spending Bill - to boost the debt ceiling.
That route could have involved weeks of parliamentary manoeuvring, amid a year-end calendar already burdened with tasks for the legislature.