US Congress gives nod to debt ceiling hike of $3.4 trillion

WASHINGTON • The US Congress gave final approval early yesterday to legislation that would raise the country's debt ceiling by US$2.5 trillion (S$3.4 trillion), moving over nearly unanimous Republican opposition to stave off the threat of a first-ever federal default until at least early 2023.

Democrats were united in support of the measure, which passed the Senate 50-49 along party lines on Tuesday afternoon and then cleared the House in a 221-209 vote shortly after midnight.

Republicans opposed the legislation en masse, with only one, Representative Adam Kinzinger of Illinois, voting in favour. The Bill now heads to President Joe Biden, who was expected to quickly sign it.

The swift action came a week after party leaders announced a deal to establish a one-time fast-track process to increase the debt ceiling with a simple majority vote, instead of the 60 votes needed to move most legislation through the Senate.

The votes occurred with little time to spare before a potential default, which would be catastrophic for the national economy.

The Treasury Department had warned that it would be unable to pay the nation's bills after yesterday, and the agency is currently using so-called "extraordinary measures", a series of fiscal tools to delay the threat of a default.

"The full faith and credit of the United States should never be questioned," Speaker Nancy Pelosi of California said just before the House vote. "The health of our economy should never be threatened. The financial security of our families must never be gambled."

Senate Majority Leader Chuck Schumer of New York said on Tuesday that the US$2.5 trillion figure would be enough to punt the threat of a default past the midterm elections next year, an assessment shared by the Treasury Department, according to a person familiar with its internal estimates.

The debt limit, which covers debt incurred by administrations from both parties, is currently set at US$28.9 trillion.

For Democrats, addressing the debt limit gives senators more time to focus directly on muscling their marquee US$2.2 trillion social safety net, climate and tax package through the Senate before Christmas, even as some senators acknowledged that such a timeline might not be feasible.

Some Democrats argued that the contortions were evidence that Congress should dispose of the process altogether, rather than periodically running up against potentially catastrophic fiscal cliffs, only to set up new ones in the future.

"I think it's very clear that this debt ceiling process has got to go," said Senator Ron Wyden, an Oregon Democrat and chairman of the finance committee.

"It is now a tool for politicians for political purposes, and it just defies common sense."

On Tuesday, Republicans were eager to have Democrats go on the record in support of the increase. Republicans could cite those votes in the future as they seek to criticise Democrats for excessive spending and adding to the national debt.

Representative Tom Cole, an Oklahoma Republican, said: "Since taking control of the House, the Senate and the White House at the beginning of this year, the majority has made repeated decisions to spend massive amounts of taxpayer dollars with only Democratic votes.

"With that power also comes responsibility to effectively govern, and the majority has failed to do so."

Former president Donald Trump railed against Senate Minority Leader Mitch McConnell in a series of statements at the weekend, charging that the senator "didn't have the guts to play the debt ceiling card, which would have given the Republicans a complete victory on virtually everything".

Mr Trump continued to urge Republicans to remove Mr McConnell from his leadership role.

NYTIMES