The luxury of time, Bill to raise the debt limit in the US Senate is almost complete, preventing a catastrophic default

Democratic Majority Leader Chuck Schumer said late on Thursday that the Senate is on pace to approve a package to raise the government’s $31.4 trillion debt limit. He added, “We are avoiding default tonight.”

Before a Monday deadline for raising the debt ceiling until January 1, 2025, all 100 senators came to an agreement to discuss up to 11 changes and then swiftly vote on enacting the measure. According to Schumer, if the proposal is successful, Congress would swiftly submit the legislation to President Joe Biden for his signature, preventing a disastrous default.

As both houses rushed to enact the legislation before a Monday deadline, the House did so on Wednesday.

In his address to the Senate, Schumer stated, “America can breathe a sigh of relief, a sigh of relief because in this process we are avoiding default.”

It is anticipated that the revisions won’t get enough support to be included into the law. A first-ever default on Washington’s debt payments might occur if any one of them does, forcing the proposal to be brought back to the House of Representatives.

Schumer and his Republican counterpart, Minority Leader Mitch McConnell, committed to do everything in their power to forward the plan that Biden and Republican House Speaker Kevin McCarthy were able to reach an agreement on that would suspend the debt ceiling, thereby erasing it temporarily in return for a spending limitation.

If Congress doesn’t take action, the Treasury Department has warned that it won’t be able to pay all of its debts on June 5.

Technically, the Treasury’s borrowing cap of $31.4 trillion was reached in January. Since then, it has been using “extraordinary measures” to scrape together the cash required to cover the costs of running the government.

Democrats and Republicans have been at odds over the debt ceiling for the last five months. Republicans, who have a slim majority in the House, have urged that any agreement increasing the debt ceiling include significant cutbacks in federal spending.

Meanwhile, Biden, Janet Yellen, the Treasury Secretary, and legislative leaders all concurred that starting a debt default due to a shortage of finances would have catastrophic consequences.

Even at this late hour, Schumer emphasised that point as he guided the bill into its successful conclusion.

He said that a default “would virtually definitely trigger another recession. Millions of American families would suffer, and it would be a nightmare for our economy. Years would be needed to recover from it.

A luxury is time.

The measure was approved on Wednesday night by a vote of 314 to 117 in the Republican-controlled House. McCarthy lost the backing of several Republican party members.

Schumer said on Thursday that the Senate does not have the luxury of time. Any unwarranted holdups or last-minute delays would be risky and possibly hazardous.

Democrats led by Biden have a slim 51-49 advantage in the Senate. According to the chamber’s rules, 60 votes are needed to approve the majority of laws, including the debt limit agreement, which means at least nine Republican votes are required.

Among the amendments that will be discussed are those that would compel spending reductions that go beyond those in the package that the House approved and halt the expedited final approval of a West Virginia energy pipeline.

In response to the large number of immigrants entering the country across the border with Mexico, Republican Senator Roger Marshall proposed an amendment to enact additional border regulations. According to him, his proposal will “put an end to the culture of lawlessness at our southern border.”

However, the proposal was rejected in the Senate because Democrats said it would remove safeguards for underage migrants and deprive American farmers of critical labour.

Republicans also want to enhance defence spending beyond what is already included in the plan that was approved by the House.

The spending restrictions included in this measure, according to Schumer, won’t prevent Congress from allocating more money for emergencies, such as supporting Ukraine in its conflict with Russia.

“This debt ceiling deal does nothing to limit the Senate’s ability to appropriate emergency supplemental funds to ensure our military capabilities are sufficient to deter China, Russia, and our other adversaries, and respond to ongoing and growing national security threats, including Russia’s evil ongoing war of aggression against Ukraine,” said Schumer.

Over the course of many weeks, Biden and McCarthy’s proxies engaged in intense discussions to piece together the measure. Republicans planned to drastically slash spending on “discretionary” programmes including housing, environmental protection, education, and medical research while requesting increases in money for the military, veterans, and potentially border security. This was the major point of contention.

The Republican expenditure reduction ideas ultimately underwent a major reduction.

The plan, according to the impartial Congressional Budget Office, would save $1.5 trillion over ten years. That is less than the $4.8 trillion in savings Republicans sought to achieve in a package they got through the House in April, and it is also less than the $3 trillion in deficit reduction Biden’s proposed budget would have achieved over that period via new taxes.

The last time the US went this close to defaulting was in 2011. This conflict hurt financial markets, caused the government’s credit rating to be downgraded for the first time ever, and increased interest rates for the country as a whole.