Senators staved off a financial crisis — and a weekend of voting in Washington — on Thursday night when the chamber signed off on a bipartisan deal to suspend the debt limit into 2025, giving the Treasury authority to borrow trillions of dollars more to pay its bills.
With only days to spare before a Monday deadline, the Senate cleared for President Joe Biden’s signature a measure that would suspend the statutory $31.4 trillion debt ceiling and impose two years of caps on discretionary spending.
The bill also would claw back unspent pandemic aid, redirect some IRS funding for other uses, streamline energy permitting, end a pause on student loan repayments and toughen some work requirements for certain recipients of food stamps and cash assistance.
Passage of the measure was virtually ensured after Biden and Speaker Kevin McCarthy, R-Calif., reached a bipartisan deal on the debt limit over the weekend to end months of partisan wrangling. It also ends fears of triggering what Treasury Secretary Janet L. Yellen warned could be an “economic catastrophe” if the debt limit were breached and government payments had to be delayed.
“It is so good for this country that both parties have come together at last to avoid default,” Senate Majority Leader Charles E. Schumer, D-N.Y., said before passage.
The bipartisan Senate vote of 63-36 came after a day of backroom negotiating, as senators aired their grievances over the package and sought votes on amendments that were designed to lodge protests without blocking final passage.
The biggest threat to the bill erupted on the Senate floor around midday, when several Republican defense hawks and top appropriators said they could not vote for the measure without a commitment from leadership to take up a supplemental defense spending bill.
They said the 3 percent defense spending increase allowed in the debt limit deal for the coming fiscal year, and a 1 percent increase allowed the following year, amount to cuts after adjusting for inflation.
“We’ll be here ’til Tuesday until I get commitments that we’re going to rectify some of these problems,” said Sen. Lindsey Graham, R-S.C., who wanted to ensure there would be more money for the Pentagon, as well as for Ukraine, Taiwan and Israel.
Senate Appropriations Chair Patty Murray, D-Wash., said any supplemental bill would also need to include funding for domestic purposes such as border security and disaster relief.
To remove that obstacle, Schumer and Minority Leader Mitch McConnell, R-Ky., entered a statement into the record pledging that the debt ceiling package wouldn’t preclude consideration of emergency supplementals, whether for defense and national security-related purposes or domestic needs.
Senators also beat back 11 amendments which were offered with the understanding they wouldn’t get the votes to be tacked onto the bill. Any adopted amendments would have sent the bill back to the House, whose members already left town for the weekend.
The rejected amendments ran the gamut. The one Democratic amendment, from Virginia’s Tim Kaine, would have struck a provision that would expedite approval of the Mountain Valley Pipeline running from West Virginia to his state.
Others would have imposed a 25 percent tariff on Chinese imports, cut additional IRS funding to offset increased defense spending, toughened work requirements to receive food stamp benefits, and more.
The long-sought compromise package likewise drew strong bipartisan support when it passed the House Wednesday on a 314-117 vote; the “no” votes were roughly evenly divided between Democrats and Republicans.
McCarthy won votes from two-thirds of his conference, a resounding victory for the first-year speaker whose tenure began with a rocky start marked by 15 rounds of balloting to hand him the gavel. And ultimately Biden won many more Democratic votes than either side expected.
Recognizing the fractured nature of McCarthy’s slim majority, Biden and top Democrats initially refused to negotiate with McCarthy over the debt limit. They felt burned by the 2011 negotiations that led to a decade of spending cuts, and calculated they could wait McCarthy out and ultimately he’d have to cave and put a “clean” debt limit increase on the floor.
But that equation changed in late April when the House GOP narrowly passed their version of a debt limit increase, with much steeper spending cuts and broader energy and other policy provisions than what ultimately cleared on Thursday. And just days later, Yellen upped the stakes by telling lawmakers they only had about a month to act.
Soon, Biden was at the negotiating table — though he characterized it as a negotiation only over the budget, not the debt limit.
Either way, both parties took something away to cast the bill in positive-enough terms to claim victory.
Republicans claimed the measure amounted to a course correction on fiscal policy, with caps on discretionary spending that would begin to curb deficits after years of pandemic-fueled growth. The bill was expected to save at least $1.5 trillion over a decade, the Congressional Budget Office estimated, though that sum amounts to a fraction of the $20 trillion in deficits projected over that time period.
GOP negotiators said they prevented any tax increases from being included, something Biden and his team demanded during the talks.
Democrats said they were able to avoid economic calamity from a debt limit breach while warding off the more drastic cuts to critical programs that House Republicans had initially sought in their April legislation.
While Republicans said the bipartisan compromise would trim nondefense spending from this year’s level, the agreement included informal side deals on IRS funding and pandemic aid that the White House said would hold nondefense spending relatively flat.
The legislation, which Biden is sure to sign before Monday, also ensures that Congress will avoid another debt limit fight until well after next year’s elections.
While the debt limit would be reinstated at a higher level on Jan. 1, 2025, the Treasury would likely again be able to employ so-called extraordinary measures, or accounting maneuvers, to avoid the need for another debt limit increase until perhaps sometime that spring.
By that point, U.S. debt subject to limit, which includes Treasury securities owned by government trust funds as well as bonds held by the public, may top $35 trillion.