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US Senate approves stop-gap deal to prevent loan defaults

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The House will ratify the debt ceiling bill and send it to the table of US President Joe Biden. (file)

Washington:

The US Senate on Thursday voted to halt a credit default that would have rocked a recession and world markets as Democrats and Republicans agreed on a stop-gap fix to raise the country’s debt limit.

The breakthrough – which averted the crisis by December 3 by adding $480 billion to total allowable debt – came with an estimated 11 days until the country would no longer be able to borrow money first or pay off debt. time in its history.

Chuck Schumer, who leads the Democrats in the Senate, announced the breakthrough deal in the early hours of the morning after talks dissolved in Congress.

“Republicans played a dangerous and risky partisan game, and I’m glad their chivalry didn’t work,” he said on the Senate floor.

Republican Senate Minority Leader Mitch McConnell offered the deal on Wednesday as his party prepared to vote against House-passed Democratic plans to increase the nation’s borrowing limit by more than a year.

Instead of solving the crisis, the new arrangement could hit the road with another big funding deadline — a shutdown that begins December 3 when government coffers will theoretically be exhausted, shutting down federal services and assets. and will paralyze many things. Washington and beyond.

The House is expected to rubber-stamp the debt ceiling bill — which passed the Senate along party lines without any Republican support — and send it to President Joe Biden’s desk mid-next week.

“What is needed now is a long-term solution, so we don’t go through this risky drama every few months, and we expect Republicans to be involved in implementing a long-term solution to the debt limit in December,” Schumer said. Will be.”

“We are ready to work with them.”

“Built Crisis”

Democrats will use the brief lull in hostility to work on his multi-trillion dollar social spending package, which is a cornerstone of Biden’s economic agenda.

McConnell is hoping to use Biden’s sweeping proposals to campaign against “reckless” Democratic spending and will bank on the counts of prolonged debt uncertainty favoring Republicans ahead of next year’s midterm elections.

“Republican and Democratic members and staff interacted in good faith overnight,” McConnell said.

“The Senate is moving toward the plan I laid out yesterday to save the American people from a manufactured crisis.”

The removal of the Republican blockade now ends an impasse that risked the federal government being unable to secure and service loans after October 18.

The United States spends more money than it collects through taxation, so it borrows money through the issuance of government bonds seen as one of the world’s most reliable investments.

About 80 years ago lawmakers introduced a limit on how much federal debt could be earned.

The limit has been raised dozens of times to allow the government to meet its spending commitments – usually without drama and with support from both sides.

Even the threat of default can scare financial markets and damage the economy. The real default would have been felt for the first time around the world.

But Republicans in both houses of Congress are protesting this time over Biden’s social spending package, the final ticket of which is likely to cost more than $1.5 trillion.

Although it is not legal to increase the loan limit to cover future expenses; It could only pay for past obligations and much of the $28 trillion national debt was accrued by the Republican administration.

McConnell had been pushing since July that Democrats postpone the debt ceiling without any Republican help, through a painstaking and partisan process known as budget reconciliation.

But he reportedly skimped on Democratic calls Wednesday to address the issue through the “nuclear option” of modifying the filibuster — which normally requires 60 votes to pass the law.

“Uncertainty”

The legislative Band-Aid passed on Thursday buys Democrats who control both the White House and chambers of Congress to pass a long-term debt limit extension, though they are still refusing to pursue reconciliation.

He says the process would be very complicated and risky. And since it doesn’t require any help from Republicans, they worry they’ll be forced to carry the political stigma of $28 trillion alone and a rising federal debt.

But the olive branch has left some senators on both sides of the aisle – and high-profile observers from near and far – dissatisfied.

Across Washington’s National Mall, the White House noted that this represented a postponement rather than a solution.

The administration said Biden “looks forward to signing it into law” but only after expressing its dismay with Congress on Wednesday, when Press Secretary Jen Psaki complained that the details were “more complicated, more complex” than a straight long-term solution. Tough Choice”.

Former President Donald Trump issued a statement from his home in Florida backing the Democratic interpretation of the development by Republicans as a strategic retreat.

“Vote not for pushing this terrible deal by folding Republican Senator, Mitch McConnell. Stay strong for our country.”

(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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