WASHINGTON: US lawmakers rubber-stamped a short-term bill to lift the nation’s borrowing authority on Tuesday (Oct 12), averting the threat of a first-ever debt default – but only for a few weeks.
The Democratic-controlled House of Representatives voted along party lines to pass the stop-gap US$480 billion hike, which advanced from the Senate last Thursday after weeks of heated debate.
“It’s about the kitchen table, it’s about our economy, the global economy, but it’s also about our constitution which says the full faith and credit of the United States shall not be in doubt,” Democratic House Speaker Nancy Pelosi told reporters ahead of the vote.
Democratic leaders had spent weeks underlining the havoc that a default would have wrought, including the loss of 6 million jobs and US$15 trillion in household wealth as well as increased costs for mortgages and other borrowing.
Republicans refused to offer any of their own votes to avert the crisis, and even blocked Democrats who control Congress from lifting the limit on their own, via a simple majority.
But the party dropped its blockade in the Senate last week, ending for now an impasse that risked leaving the federal government incapable of securing and servicing loans after Oct 18.
The new arrangement merely kicks the can down the road, possibly to complicate another major funding deadline – a shutdown that would begin from Dec 3 when the government’s coffers theoretically run out.
“FULL FAITH AND CREDIT”
The borrowing cap may yet turn out to be less pressing, however.
Economists estimate that the nation will reach the new, revised debt limit sometime in mid-December or early January – slightly later than the Dec 3 date that Congress originally projected.
The United States 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.
The ceiling has been lifted dozens of times to allow the government to meet its spending commitments – usually without drama and with the support of both parties – and stands at around US$28 trillion.
But Republicans in both chambers of Congress have this time objected, saying they refuse to support Biden’s “reckless” taxing and spending plans.
In reality, raising the debt ceiling does not authorise new spending – it merely pays for expenses that both Republican and Democratic administrations have already committed to.
“This is about meeting obligations that the government has already incurred, including from the bipartisan COVID-19 relief or legislation passed last year,” Pelosi said.
“Only 3 per cent of the current debt that we’re addressing here has been incurred during the Biden years.”
The absurdity of regularly risking a recession – not to mention America’s credit rating and the stability other major economies – over partisan squabbling has not been lost on Congress.
Pelosi was asked Tuesday about a growing clamour to take the decision on raising the debt ceiling away from the party politics on Capitol Hill and give it to the Treasury.
“That seems to have some appeal to both sides of the aisle because of the consequences for people of not lifting it,” she said.
“Many, many Democrats and Republicans have voted against lifting the debt ceiling – but never (before) to the extent of jeopardising it.”