Congress approved a $2.5 trillion debt ceiling increase, ending months of debate between Democratic and Republican leadership.
In 2019, Congress suspended the debt ceiling — which prevents the federal government from assuming a certain level of national debt — until August 2021. In an attempt to make Democrats enact a permanent solution on their own by the end of the year, Senate Minority Leader Mitch McConnell (R-KY) gave Democrats a short-term deal in October to suspend the debt ceiling.
In a party-line vote, however, lawmakers settled upon an arrangement that will fund the government through the 2022 midterm elections. The New York Times reported:
Democrats were united in support of the measure, which passed the Senate 50 to 49 along party lines on Tuesday afternoon and then cleared the House in a 221-to-209 vote shortly after midnight on Wednesday. Republicans opposed the legislation en masse, with only one, Representative Adam Kinzinger of Illinois, voting in favor. The bill now heads to President Biden, who was expected to quickly sign it.
The swift action came a week after party leaders announced a deal to establish a one-time fast-track process to increase the debt ceiling with a simple majority vote, instead of the 60 votes needed to move most legislation through the Senate.
For the past several months, Treasury Secretary Janet Yellen has repeatedly warned Congress about the dangers of defaulting on federal debt.
“In a matter of days, millions of Americans could be strapped for cash,” Yellen wrote in September for The Wall Street Journal before the short-term deal was approved. “We could see indefinite delays in critical payments. Nearly 50 million seniors could stop receiving Social Security checks for a time. Troops could go unpaid. Millions of families who rely on the monthly child tax credit could see delays. America, in short, would default on its obligations.”
“The U.S. has never defaulted. Not once. Doing so would likely precipitate a historic financial crisis that would compound the damage of the continuing public health emergency. Default could trigger a spike in interest rates, a steep drop in stock prices and other financial turmoil.”
Strife over the debt ceiling has led to renewed debate over the national debt — which presently sits at over $29 trillion. Last week, President Biden signed a bill that would “fast-track the process to raise our debt limit” and “reassure all the economic markets at home and around the world that we’re going to continue to pay our debts when they are due.”
Several commentators, however, noted that the move was entirely meaningless.
“I remember when my parents had to use credit cards to pay bills too,” said YouTuber Tim Pool.
“The United States pays its debts when they are due by raising the debt ceiling to take on even more debt and ‘printing’ more money out of thin air,” noted financial meme account Litquidity.
“The United States pays its debts when they are due…by robbing Peter to pay Paul,” added investor Tyler Winklevoss.