The U.S. Senate has approved a fiscal deal between the White House and Republicans in Congress that ends a weeks-long political gridlock that threatened to lead to an unprecedented default in the world’s largest economy.
Lawmakers in the Senate passed the bill Thursday night with overwhelming bipartisan support, with 63 in favor of the legislation and 36 against. The House of Representatives had given the green light to the agreement on Wednesday evening.
The bill now heads to President Joe Biden’s desk for his signature, just four days before the U.S. Treasury Department predicted it would run out of money to pay all of its bills. Such a scenario would have been a huge self-inflicted wound to Washington and a potentially traumatic blow to the global economy and financial markets.
“Senators from both parties voted to protect the hard-earned economic progress we have made and prevent a first-ever default by the United States,” Biden said in a statement after the vote. “Together, they have once again demonstrated that America is a nation that pays its bills and honors its obligations — and always will be.”
The agreement raises the US borrowing limit to 2025 and sets new limits on government spending for the next two years, limiting US fiscal policy at least until after the next presidential election.
The Senate vote ended weeks of drama in Washington, including tense talks between Biden aides and negotiators for Republican House Speaker Kevin McCarthy, who reached a deal Saturday.
Biden and congressional leaders then set out in a highly polarized political climate to convince rank and file members to vote quickly to approve the deal.
The final Senate vote came after a series of amendments from lawmakers unhappy with certain terms of the bill failed to pass. Virginia Democrats Tim Kaine and Mark Warner unsuccessfully tried to remove a provision that hastened the completion of a controversial gas pipeline.
Meanwhile, defense hawks led by South Carolina Republican Lindsey Graham received critical assurances from Senate leaders in the final hours that the pact would not limit the Pentagon’s spending needs, including what it might need to address crises in Ukraine, Taiwan or the United States. address the Middle East. East.
The deadlock over the debt ceiling will prove less painful for investors than a similar political confrontation in 2011 between former President Barack Obama and John Boehner, then Republican Speaker of the House of Representatives. That default brush resulted in a downgrade of the US triple-A credit rating by Standard and Poor’s and a sharp sell-off in equities.
But the political bickering of the past few weeks has nevertheless highlighted the extent to which Republicans were willing to use the lending cap as leverage to force policy concessions.
The White House and members of Biden’s Democratic Party have been exploring ways to avoid future battles over the debt ceiling, including whether they have legal grounds for not respecting the borrowing limit by invoking the 14th Amendment to the Constitution.