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US averts first-ever default with 11th-hour debt deal

Published : 03 Jun 2023 01:14 AM | Updated : 03 Jun 2023 01:14 AM

US senators voted to suspend the federal debt limit Thursday, capping weeks of fraught negotiations to eliminate the threat of a disastrous credit default just four days ahead of the deadline set by the Treasury.

Economists had warned the country could run out of money to pay its bills by Monday -- leaving almost no room for delays in enacting the Fiscal Responsibility Act, which extends the government's borrowing authority through 2024 while trimming federal spending.

Hammered out between Democratic President Joe Biden and the Republicans, the measure passed the Senate with a comfortable majority of 63 votes to 36 a day after it had sailed through the House of Representatives.

"No one gets everything they want in a negotiation, but make no mistake: this bipartisan agreement is a big win for our economy and the American people," Biden said in a statement posted to social media.

He said he would sign the bill "as soon as possible" and address the nation


Democratic Senate Majority Leader Chuck Schumer added that the nation could

"breathe a sigh of relief" after avoiding a "catastrophic" economic collapse.

"But, for all the ups and downs and twists and turns it took to get here, it

is so good for this country that both parties have come together at last to

avoid default," he said.

The bill -- which now heads to Biden's desk to be signed into law -- ended a

day of intense back-and-forth between party leaders and rank-and-file members

who had threatened the bill's quick passage with last-minute gripes about the


Democratic leaders had spent months underlining the havoc that a first

default in history would have wrought, including the loss of millions of jobs

and $15 trillion in household wealth, as well as increased costs for

mortgages and other borrowing.

- 'Behind the eight ball' -

The late evening drama came after a series of failed ballots on amendments

sought mainly by Republicans who were threatening at one point to hold up the

process, dragging it deep into the weekend.

Senators elected to offer 11 tweaks to the 99-page text, many objecting to

funding levels for their pet projects -- from border control and Chinese

trade to taxation and the environment -- and each requiring a vote.

Defense hawks upset at Pentagon spending being capped at Biden's budget

request of $886 billion threatened at one point to derail the bill's passage


In the end they fell in line after being offered a commitment to a separate

bill providing cash for Ukraine's defense against the Russian invasion, and

promoting US national security interests in the Middle East and in the face

of Chinese aggression against Taiwan.

"As currently written, this bill puts our military behind the eight ball...

The first and most important dollars we allocate each year in the budget are

those to protect and defend the United States and our interests," said South

Carolina Republican Lindsey Graham.

America spends more money than it collects through taxation, so it borrows

money via the issuing of government bonds, seen as among the world's most

reliable investments.

Around 80 years ago, lawmakers introduced a limit on how much federal debt

could be accrued.

- Politically toxic -

The ceiling has been raised more than 100 times since to allow the government

to meet its spending commitments -- usually without drama and with the

support of Democrats and Republicans -- and stands at around $31.5 trillion.

Both parties see raising the debt limit as politically toxic, although they

acknowledge that failure to do so would plunge the US economy into a

depression and roil world markets as the government missed debt repayments.

Republicans hoped to weaponize the extension to campaign against what they

see as Democratic overspending ahead of the 2024 presidential election,

although hikes in the debt ceiling only cover commitments already made by

both parties.

Kevin McCarthy, the top lawmaker in the Republican-led House, had touted the

bill he spent weeks negotiating as a big victory for conservatives, although

he faced a backlash from hardliners on the right who said he had made too

many concessions on spending cuts.

He fell one short of the 150 votes -- two thirds of his caucus -- he had

promised to deliver in the lower chamber as he fought to quell a right-wing

rebellion, and needed Democratic help to advance the bill to the Senate.

On the other end of Pennsylvania Avenue, the vote was being touted as a major

victory for Biden, who managed to protect almost all of his domestic

priorities from deep cuts threatened by Republicans.