Congressional leaders have struck a deal that paves the way to raise the federal government’s borrowing limit and avert a looming crisis over the US debt ceiling.
The Democrat-controlled House of Representatives passed a measure in a vote along party lines on Tuesday that would allow the Senate to raise the ceiling by a simple majority vote, bypassing the upper chamber’s 60-vote “filibuster” threshold.
Democrats control the Senate by the narrowest of margins with Kamala Harris, the vice-president, able to cast a tiebreaking vote.
The procedural change also requires the support of at least 10 Republican senators in order to become law. Mitch McConnell, the Senate’s top Republican, endorsed the plan and said he was confident that at least nine of his colleagues would sign on.
An initial Senate vote, expected on Thursday, would set the stage for Democrats to act unilaterally to raise the borrowing limit.
Republicans have repeatedly argued that Democrats should “go it alone” in raising the debt ceiling, despite having lifted the borrowing limit several times during the Trump administration.
“I think this is in the best interest of the country by avoiding default,” McConnell said. “I think it is also in the best interest of Republicans who feel very strongly that the previous debt ceiling that we agreed to when President [Donald] Trump was here carried us through August, and this current debt ceiling is indeed about the future and not about the past.”
Janet Yellen, Treasury secretary, has warned the US government risks default as soon as next week if lawmakers are unable to reach an agreement — an event she recently said would “eviscerate” the economic recovery.
The Biden administration welcomed the “positive development”. Jen Psaki, White House press secretary, praised Charles Schumer, the Democratic Senate majority leader, and McConnell for working in “good faith . . . to prevent a default”.
In a letter to Democratic House members on Tuesday, Speaker Nancy Pelosi said addressing the debt limit was “imperative” for the US and global economy, and blamed Republicans for the impasse.
“This is about meeting obligations that the government has already incurred, largely during the Trump administration,” Pelosi wrote.
Some market participants had started trying to avoid holding Treasury bills that were set to mature when the US government risked running out of cash, underscoring the high-stakes nature of the debt ceiling negotiations.
Independent analysts have said the Treasury has until early January before facing a possible default.