The U.S. House of Representatives approved budget legislation that allows raising the U.S. debt ceiling beyond the previously set threshold of $32 trillion. The bipartisan agreement comes just days before the U.S. government's insolvency deadline expires. The legislation still needs to pass the Senate, where a slim Democratic majority ensures it will likely pass without issue.
House representatives passed the legislation by a landslide vote of 314 to 117 against. 149 Republicans voted in favor of the legislation, along with 165 Democrats. The vote comes after the president and House Speaker, Republican Kevin McCarthy, signed an agreement on Sunday that met some Republican demands to cut federal education and welfare budgets.
The House speaker celebrated the passage of the legislation, describing it as a past victory for his party, despite the fact that it was also an achievement for the president and Democrats, at a sensitive time for Biden in terms of public support. "I've been thinking about this day since I was elected Speaker because I knew that raising the debt ceiling was coming, you wanted us to make history, I wanted us to do something that no Congress had done before," McCarthy said.
'We made history', House Speaker Kevin McCarthy, photo: AFP
President Biden, apparently in an attempt to cause a rift with the radical wing of his party, gave a more conciliatory speech and avoided celebrating the occasion. "The agreement on the budget is a compromise of both parties. Neither side got everything it wanted. I was very clear when I said that the only way to deal with the issue was a compromise between the two parties. This agreement is being tested."
The U.S. debt ceiling currently stands at $31.4 trillion. The U.S. government has been warning for several weeks that if Congress, one of whose houses is controlled by the Republican Party, does not raise the debt ceiling, the U.S. government will have no way to finance its obligations with regard to the regular payments to repay loans it has taken. This could mean a default that would shake up the economy and probably lead to a downgrade in the U.S. credit rating, with all that entails.
The reason the US needs to take out more and more loans – in the form of bonds and other means – is that it has a fixed budget deficit, meaning that it has too little money available than it needs to spend on current payments, and if the debt ceiling is not changed, the government will probably have no way to finance the current deficit by the beginning of June. In fact, a few months ago, the US officially reached the debt ceiling, but the US Treasury Department managed to finance the deficit with existing funds and not through new loans by diverting resources. Now, these special measures will probably not be enough, and the United States may, for the first time in history, be in a state of payment arrears.
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