Default Averted? Senate Passes Bill Allowing Democrats To Raise Debt Limit Without GOP Support

Topline

Just days before the U.S. Treasury stands to run out of cash to pay the government\’s bills, the Senate on Thursday passed a measure that gives Democrats the opportunity to raise the congressionally set limit on the nation\’s total borrowing with a simple majority vote, after months of political infighting.

Senate Majority Leader Chuck Schumer during a news conference on Dec. 7, 2021.


ASSOCIATED PRESS

Key Facts

Tucked into a bill that would block cuts to Medicare funding, the resolution fast-tracking a debt limit increase passed the Senate with a vote of 59 to 35, with 10 Republicans joining all present Democrats in support. 

Fourteen Republicans voted to advance the measure earlier Thursday after Senate Majority Leader Mitch McConnell (R-Ky.), who\’s repeatedly blasted Democratic spending efforts, brokered a deal with Majority Leader Chuck Schumer to avoid a debt default without offering any Republican votes in favor of the final legislation. 

The House passed the bill Tuesday night in a near-party-line vote of 222 to 212, with only one Republican, Rep. Adam Kinzinger (Ill.), joining Democrats in support. 

The freshly passed measure gives Senate Democrats the ability to introduce legislation that would raise the nation\’s current debt limit of $28.5 trillion by an amount that\’s yet to be announced, thereby preventing a default that Treasury Secretary Janet Yellen said could happen as soon as next week.

In a note to clients on Wednesday, Bank of America economists said they believe the debt limit increase will likely be in the $2 trillion to $2.5 trillion range, buying Congress enough time to avoid additional debt limit negotiations before the midterm elections next year.

What To Watch For

Schumer has yet to specify when the Senate will introduce or vote on the bill to raise the debt limit, but House Majority Leader Steny Hoyer (D-Md.) said Thursday the lower chamber would meet early next week for a final vote on any Senate-passed bill. 

Key Background

For months, lawmakers have been bitterly divided over how to address the United States\’ growing debt load of more than $29 trillion. Democrats and Republicans struck a temporary funding deal in early October and raised the debt limit by $480 billion, but two months later, those funds are set to run dry. Though they voted to raise or suspend the debt limit three times under former President Donald Trump, Republicans have since soured on additional extensions given Democrats\’ lofty spending ambitions—chiefly President Joe Biden\’s $1.8 trillion Build Back Better proposal. \I think this is a mistake, but we\’ll see what happens,\ Sen. Lindsey Graham (R-S.C.) told reporters Wednesday of the fast-track solution. \We\’ve been telling our Republican base for four months that [Democrats] are spending money by themselves, and they should raise the debt ceiling by themselves.\

Tangent

If Congress fails to raise or suspend the debt ceiling once the federal government hits its borrowing limit, the Treasury would be immediately impaired in carrying out its basic functions, including providing financial assistance like Social Security. “It could take decades to recover,” White House economists  said before the last deadline in October, pointing out roughly 56 million Social Security recipients may not receive their payments on time, or at all, in the event of a default.

Further Reading

Yellen Says US Could Run Out Of Cash By Mid-December If Congress Doesn\’t Raise Debt Ceiling Again (Forbes)

Tens Of Millions Of Americans Could Lose Benefits \’Overnight\’ If US Defaults This Month, White House Warns (Forbes)

US Set To Narrowly Avoid Government Shutdown After Senate Passes Last-Minute Funding Bill (Forbes)