Kevin McCarthy, the current speaker of the United States House of Representatives
The United States House of Representatives passed legislation late Wednesday to implement the debt ceiling agreement negotiated between President Joe Biden and House Speaker Kevin McCarthy, putting Congress on track to approve additional borrowing just days before the government is anticipated to run out of money, Fox News reported.
Majorities in both parties supported the agreement, which also satisfies the GOP demand to reduce nondefense discretionary spending over the next two years, and the package passed by a vote of 314 to 117. Democrats supported the bill 165-46, while Republicans supported it by a vote of 149-71. Democrats took credit for their role in advancing the bill. 52 Democrats joined with Republicans in an unusual procedural vote earlier in the day to keep the bill alive, Fox News reported.
Minority Leader Hakeem Jeffries said on Wednesday night, “I thank House Democrats for your steady hand, for your unity of purpose, for your efforts to make sure that we push back the extreme mega Republican efforts to jam right wing cuts down the throats of the American people that would have undermined the health, the safety and the economic well-being of everyday Americans.”
He added, “From the very beginning, House Democrats were clear that we will not allow extreme MAGA Republicans to default on our debt, crash the economy or trigger a job killing recession. Under the leadership of President Joe Biden, Democrats kept our promise and we will continue.”
Calling the bill “objectionable,” former House speaker Nancy Pelosi said, “It will avert unprecedented default, which would bring devastation to America’s families.”
McCarthy, a Republican from California, praised the bill’s spending reductions even though the package fell short of conservatives’ original goal of cutting expenditure by around USD 150 billion from this year to the next.
He said, “Tonight we’re going to do something we haven’t done before,” McCarthy said. “Tonight, we are going to vote for the largest savings in American history – over $2.1 trillion. That’s what we’re voting for. Every great nation that has overextended itself has collapsed”, according to the Fox News report.
The House vote sent the bill to the Senate, where Majority Leader Chuck Schumer earlier in the day vowed it would be debated “as soon as possible.” Barring any objections from senators to rushing the bill, that vote is anticipated to happen this week.
Treasury Secretary Janet Yellen has cautioned that if Congress does not increase or suspend the debt ceiling by Monday, June 5, the US government will be unable to cover its ongoing obligations.
Senate Minority Leader Mitch McConnell responded to a question about whether a Senate vote by Friday was feasible, saying, “I can tell you what I hope happens… that we can finish this Thursday or Friday and soothe the country and soothe the markets” reported Fox News.
The final agreement reached over the weekend suspends the debt ceiling without a limitation until January 1, 2025. It also reduces non-defence expenditure to levels similar to fiscal 2022, caps growth at 1 per cent for the following two years, and proposes optional caps for the next four years. Additionally, it recovers some cash intended for the Internal Revenue Service and certain Covid-19 pandemic funds that were not yet spent. But shortly after the agreement was reached on Saturday night, several conservative Republicans opposed it.
Republicans who opposed the bill frequently argued that the expenditure reductions were insufficient, and many pushed McCarthy to return to the original Limit, Save, Grow Act, which Democrats in the House and Senate called the “Default on America Act.” Others, like Rep. Mike Waltz, R-Fla, voiced concerns about the slight increase in the Defence budget in the plan, which at little over 3 per cent is less than the inflation rate.
One of McCarthy’s chief negotiators, Rep Garret Graves, R-La, disputed the claim that the bill did not go far enough to satisfy Republican objectives. “To say we didn’t push [the White House] to the brink, to say that we didn’t maximise negotiations, it’s just an uninformed position,” he told Fox News.
What if the US fails to raise the debt ceiling?
If the US government fails to raise the debt ceiling or suspend it altogether, it risks defaulting on its debt. The government’s default could cause a recession in the US, with catastrophic effects on the global economy.
The US government’s default would cause chaos in the financial markets. The investors, who viewed US government bonds as safe investments, might panic. The stock market could witness a significant sell-off. The citizens could see an interest rate hike.
It is pertinent to note that due to a global reliance on the US Dollar, the impact would also be devastating for the global economy. “No corner of the global economy will be spared,” warned Chief Economist at Moody’s Analytics Mark Zandi on the chance that the US default and the crisis were not resolved quickly.
Furthermore, the US’s credit rating would be downgraded if it defaults, making it more challenging to borrow money in the future. If the US’s credit rating is downgraded, the country would have to pay a higher interest rate for future borrowings.
[with inputs from ANI]
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