The U.S. Senate on Thursday passed bipartisan legislation backed by President Joe Biden that lifts the government's $31.4 trillion debt ceiling, averting what would have been a first-ever default.
The Senate voted 63-36 to approve the bill that was passed on Wednesday by the House of Representatives, as lawmakers raced against the clock following months of partisan bickering between Democrats and Republicans.
The Treasury Department had warned it would be unable to pay all its bills on June 5 if Congress failed to act by then.
"We are avoiding default tonight," Senate Majority Leader Chuck Schumer said on Thursday as he steered the legislation through his 100-member chamber.
Biden praised Congress' timely action. "This bipartisan agreement is a big win for our economy and the American people," the Democratic president said in a statement, adding that he will sign it into law as soon as possible. He said he would make an additional statement on Friday.
Before the final vote, senators tore through nearly a dozen amendments - rejecting all of them during a late-night session in anticipation of Monday's deadline.
With this legislation, the statutory limit on federal borrowing will be suspended until Jan. 1, 2025. Unlike most other developed countries, the United States limits the amount of debt the government can borrow, regardless of any spending allocated by the legislature.
Schumer and his Republican counterpart Minority Leader Mitch McConnell delivered on their promise to do all they could to speed along the bill negotiated by Biden and Republican House Speaker Kevin McCarthy.
"America can breathe a sigh of relief," Schumer said in remarks to the Senate.
'Time is a luxury'
Republicans had blocked passage of any debt limit increase until they locked in some wide-ranging spending cuts in a move they said would begin addressing a rapidly escalating national debt.
Biden instead pushed for tax increases on the wealthy and corporations to help address the growing debt. Republicans refused to consider any sort of tax hikes.
Both parties walled off the sprawling Social Security and Medicare retirement and healthcare programs from cuts, and McCarthy refused to consider reducing spending on the military or veterans.
That left a somewhat narrow band of domestic "discretionary" programs to bear the brunt of spending cuts. In the end, Republicans won about $1.5 trillion in reductions over 10 years, which may or may not be fully realized. Their opening bid was for $4.8 trillion in savings over a decade.
Treasury technically hit its limit on borrowing in January. Since then it has been using "extraordinary measures" to patch together the money needed to pay the government's bills.
Biden, Treasury Secretary Janet Yellen and congressional leaders all acknowledged that triggering a debt default for lack of funds would have serious ramifications. Those included sending shock waves through global financial markets, possibly triggering job losses and a recession in the United States and raising families' interest rates on everything from home mortgages to credit card debt.
Schumer drove that point home even as he steered the bill toward final passage.
A default, he said, "would almost certainly cause another recession. It would be a nightmare for our economy and millions of American families. It would take years, years to recover from."
The Republican-controlled House passed the bill on Wednesday evening in a 314-117 vote. Most of those who voted against the bill were Republicans.
"Time is a luxury the Senate does not have," Schumer said on Thursday. "Any needless delay or any last-minute holdups would be an unnecessary and even dangerous risk."
Among the amendments debated were ones to force deeper spending cuts than those contained in the House-passed bill and stopping the speedy final approval of a West Virginia energy pipeline.
Cobbled over weeks
Republican Senator Roger Marshall offered an amendment to impose new border controls as high numbers of immigrants arrive at the U.S.-Mexico border. His measure, he said, would "put an end to the culture of lawlessness at our southern border."
The Senate defeated the amendment, however. Democrats said it would strip away protections for child migrants and rob American farmers of needed workers.
Some Republicans also wanted to beef up defense spending beyond the increased levels contained in the House-passed bill.
In response, Schumer said the spending caps in this legislation would not constrain Congress in approving additional money for emergencies, including helping Ukraine in its battle against Russia.
"This debt ceiling deal does nothing to limit the Senate's ability to appropriate emergency supplemental funds to ensure our military capabilities are sufficient to deter China, Russia and our other adversaries, and respond to ongoing and growing national security threats, including Russia's evil ongoing war of aggression against Ukraine," Schumer said.
The bill was cobbled together over weeks of intensive negotiations between senior aides for Biden and McCarthy.
The main argument was over spending for the next couple of years on discretionary programs such as housing, environmental protections, education and medical research that Republicans wanted to cut deeply.
The nonpartisan Congressional Budget Office estimated the bill would save $1.5 trillion over 10 years. That is below the $3 trillion in deficit reduction, mainly through new taxes, that Biden proposed.
The last time the United States came this close to default was in 2011. That standoff hammered financial markets, led to the first-ever downgrade of the government's credit rating and pushed up the nation's borrowing costs.
There was less drama this time as it became clear last week that Biden and McCarthy would find a deal with enough bipartisan support to get through Congress.