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Senate leaders announced a deal to extend the government’s borrowing power until December, temporarily averting an unprecedented federal default that experts say devastated the economy.
“Our hope is to get there today,” Majority Leader Chuck Schumer said on Thursday as the Senate opened.
In their deal, Republican and Democratic leaders moved away from a perilous standoff over lifting the country’s borrowing ceiling, with Democratic senators accepting an offer from Republican Senate leader Mitch McConnell.
McConnell made the offer a day earlier, just before Republicans were ready to block longer-term legislation to suspend the debt limit and as Joe Biden and business leaders feared a default disrupts government payments to millions of people and throws the country into recession.
Wall Street continued to rally to the news. The S&P 500 was up 1.5% at noon, and the Nasdaq composite, with a heavy weight in technology stocks, was up 1.8%.
The deal paves the way for some sort of sequel in December, when Congress faces pressing deadlines again to fund the government and raise the debt limit before heading home for the holidays.
The deal will raise the debt ceiling by around $ 480 billion, according to a Senate adviser familiar with the negotiations who requested anonymity. This is the level that the Treasury Department declared necessary to reach on December 3.
Congress had just days to act before the Oct. 18 deadline, when the Treasury Department warned it would quickly run out of funds to manage the country’s already accumulated debt.
McConnell and Senate Republicans have insisted Democrats will have to go it alone to raise the debt ceiling and allow the Treasury to renew its borrowing so the country can meet its financial obligations.
Additionally, McConnell insisted that Democrats are using the same cumbersome legislative process, called reconciliation, that they used to pass a $ 1.9 billion Covid-19 relief bill and that ‘they used to try to pass Biden’s $ 3.5 billion measure to strengthen safety net, health and environmental programs.
McConnell said in his offer Wednesday that Republicans would still insist Democrats use the reconciliation process for an extension of the long-term debt limit.
However, he said Republicans are ready to “help speed up” this process, and in the meantime, Democrats can use the normal legislative process to pass a short-term debt limit extension with a fixed dollar amount. to cover current spending levels through December.
While he continued to blame Democrats, his offer will also allow Republicans to avoid the condemnation they would have received from some quarters if a financial crisis were to occur.
In a White House event with prominent business leaders, Biden shamed Republican senators for threatening to obstruct any suspension of the $ 28.4 billion cap on borrowing power of the government.
“It is not fair and it is dangerous,” Biden said of resistance from Republicans in the Senate.
Ahead of the White House meeting, the administration warned that if the borrowing limit was not extended, it could trigger an international financial crisis that the United States may not be able to handle.
“A default would send shockwaves through global financial markets and likely cause credit markets around the world to freeze and stock markets to fall,” the White House’s board of economic advisers said in a new report. “Employers around the world should probably start laying off workers. “
The recession that could be triggered could be worse than the financial crisis of 2008, as it would come while many countries are still grappling with the Covid-19 pandemic, according to the report.
Once a routine affair, raising the debt ceiling has become politically treacherous over the past decade or more, used by Republicans in particular to denounce government spending and rising debt burdens.
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