Senate passes bill to raise debt ceiling, preventing first-ever U.S. default
The Senate passed a House-approved bill to raise the debt ceiling and cap government spending, sending it to President Joe Biden.
Senate Majority Leader Charles Schumer, D-N.Y., conducts a news conference after the senate luncheons in the U.S. Capitol on Tuesday, May 2, 2023.
Tom Williams | Cq-roll Call, Inc. | Getty Images
He is expected to sign it Friday and address the nation at 7 p.m. ET, just three days before the U.S. risked its first-ever sovereign debt default.
"No one gets everything they want in a negotiation, but make no mistake: This bipartisan agreement is a big win for our economy and the American people," Biden said in a statement after the vote.
Stock futures rose slightly Thursday night as the U.S. averted potential economic chaos.
The compromise debt ceiling bill passed the Senate by a 63-36 margin, enough support from Democrats and Republicans to overcome the chamber's 60-vote threshold to avoid a filibuster.
But the party breakdown was not even. A majority of Senate Republicans, 31 senators, voted against the debt ceiling bill, while just 17 GOP senators supported it. On the left, only four Democrats and Vermont independent Sen. Bernie Sanders voted to sink the bill, while the other 46 members of the Democratic caucus voted for it.
The vote was the final chapter in a remarkable day of deal-making and rapid-fire voting in the Senate, a body that typically requires days, not hours, to deliberate over and amend House bills.
On Thursday night, the chamber voted down 11 proposed amendments to the Fiscal Responsibility Act passed by the House, before ultimately passing the bill itself. In exchange for being allowed to put their amendments up for a vote, several senators who had serious objections to parts of the bill agreed not to delay the legislation with procedural holdups.
The driving force behind the turbo votes was simple: The Treasury Department's June 5 deadline for raising or suspending the debt ceiling was just four days away.
Treasury Secretary Janet Yellen believed the government would most likely be unable to meet its debt obligation after Monday, unless Congress voted to raise the debt limit.
Following the Senate vote, Yellen praised the legislation, saying it "protects the full faith and credit of the United States and preserves our financial leadership, which is critical to our economic growth and stability."
Investors and market analysts have watched the monthlong debt ceiling drama play out with increasing apprehension, as the clock ticked down to the final weeks before a potential U.S. debt default, with still no deal.
In a statement after Thursday's vote, Moody's said that the resolution to the debt ceiling crisis was in line with its expectation, and indicated that it was not considering a downgrade of U.S. debt.
"The stable outlook on the US' Aaa sovereign credit rating reflects that expectation," said William Foster, senior vice president at Moody's Investors Service.
(L-R) US President Joe Biden, Speaker of the House Kevin McCarthy, Republican of California, depart after the annual Friends of Ireland luncheon on St. Patrick's Day at the US Capitol in Washington, DC, on March 17, 2023.
Andrew Caballero-Reynolds | AFP | Getty Images
The bill that passed the Senate on Thursday was the product of intense, and at times bitter, negotiations between House Speaker Kevin McCarthy's allies and the White House. The final deal handed conservatives several ideological policy victories in exchange for their votes to raise the debt ceiling beyond next year's presidential election and into 2025.
Biden and McCarthy both claimed the outcome as a victory: McCarthy, because he had passed new work requirements for some federal aid, a two-year government spending cap and a clawback of unspent Covid funds.
The White House reaction to the bill's progress through Congress this week has been more low-key, but insiders said this was a deliberate tactic to avoid alienating Republicans whose votes were needed to pass the legislation.
The bill moved through the House in about 72 hours, and passed Wednesday night with a resounding majority, 314-117.
In the end, however, more House Democrats voted for the bill than did Republicans, despite the fact that the bill was the brainchild of House GOP leadership.
In the Senate, the final vote was bipartisan, but it was not an easy lift.
Majority Leader Chuck Schumer spent much of the day Thursday hammering out an agreement with a group of Senate Republicans who demanded that he pledge to support a supplemental defense funding bill before they would agree to fast-track the debt ceiling bill.
The current House debt ceiling bill provided $886 billion in defense spending for fiscal 2024, an increase of 3% year over year. That figure rises to $895 billion in 2025, an increase of 1%.
But GOP Sen. Susan Collins of Maine called this "woefully inadequate" Thursday, arguing that a 1% increase did not keep pace with inflation, so in practical terms, it was actually a decrease in military funding. The solution came in the form of a rare joint statement from Schumer and Senate Minority Leader Mitch McConnell, R-Ky., which was read on the floor.
"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," Schumer read. "Nor does this debt ceiling limit the Senate's ability to appropriate emergency supplemental funds and respond to various national issues, such as disaster relief, combating the fentanyl crisis or other issues of national importance," said Schumer.
The majority leader's message was unmistakable: Regardless of what the bill said, the Senate would continue to spend money above and beyond that to fund what its members believed was important.
With the debt ceiling crisis averted, Congress now turns its eyes to a summer of appropriations, haggling over how to spend their capped sums of money next year.