The US Senate has approved the proposal to temporarily remove the ceiling on the US debt mountain.
– A great victory for the people of the United States, says President Joe Biden.
With the fact that the upper house of the US Congress has now also approved the proposal to remove the debt ceiling, temporarily until the year 2025, both Republicans and Democrats hope that an economic meltdown in the country and on the world’s markets has been avoided.
The bill ended up on the Senate’s table after the House of Representatives gave its yes on Wednesday. It was negotiated last week by the president, Democrat Joe Biden, and Republican front-runner Kevin McCarthy.
“No One Can Have Everything”
Biden was of course pleased with the Senate’s decision late Thursday local time and commented on Twitter.
“Nobody can get everything they want in a negotiation, but mind you, this deal is a big win for our economy and the American people,” writes the president.
He added that he will sign the law “as soon as possible” and that he will address the nation on Friday.
And it’s in a hurry. US Treasury Secretary Janet Yellen stated last week that negotiators had until June 5 before the government no longer has the funds to pay its bills.
Few are completely satisfied
Few are entirely happy with the settlement, but many members believe that the compromise is better than the alternative – that the United States would end up in severe financial turmoil, which would have ramifications for the entire world economy.
In the House of Representatives, 314 voted for the bill and 117 voted against. Of those who voted against, 71 were Republicans and 46 were Democrats.
In the Senate, the proposal was voted through with the numbers 63–36.
The agreement, which also includes limitations on government spending, means that the limit for the US national debt that the politicians set up will not apply during a transition period. The debt ceiling has recently been set at 31,400 billion dollars – corresponding to more than 40,000 kroner for every person on earth.
But according to the new settlement, the debt ceiling will only return in January 2025, i.e. after next year’s presidential election. In the meantime, the US will continue to borrow money for the state budget, which means that the negotiations in the divided Washington are then feared to be even more difficult.
Fact: US debt hit the roof last winter (TT)
Formally, the US hit the debt ceiling – at 31.4 trillion dollars – already in January. But the Ministry of Finance has since been able to pay for itself by shuffling around existing resources. However, Finance Minister Janet Yellen has warned that at the beginning of June it will no longer be possible to handle the payments in this way.
The consequences if the US finds it difficult to pay would be dramatic and force drastic political measures. Most expect the US to go to great lengths to keep up with its interest payments and repayments – to avoid a global financial market catastrophe.
The austerity that would be necessary without new loans would therefore hit retirees and other beneficiaries within the US social security system very hard and also mean suspended payments to suppliers and ongoing operations – including defense. This scenario would create a deep recession in the world’s largest economy, according to SEB’s economists.
Sources: Bloomberg, SEB, The Wall Street Journal