The House on Wednesday in a 314-117 vote passed a bill to raise the debt ceiling just days before a potential U.S. default and impending economic chaos.
The Fiscal Responsibility Act of 2023 will now head to the Senate where a vote is expected later this week. The bill, the culmination of weeks of negotiations between the White House and House Republicans, would raise the debt ceiling until January 2025 and cap federal spending for at least two years. The Congressional Budget Office on Tuesday estimated the bill would cut the federal deficit by $1.5 trillion over the next decade.
The debt limit or debt ceiling — the terms are used interchangeably — is a cap on the money the U.S. government can borrow to pay its bills. It does not authorize any new spending, but it allows the Treasury Department to finance the existing legal obligations already approved by Congress. The debt limit was last raised in December 2021 and stands at $31.4 trillion.
Treasury Secretary Janet L. Yellen has projected the X-date — when the U.S. will no longer be able to meet all its obligations in full and on time — will arrive June 5.
"Our bipartisan budget agreement prevents the worst possible crisis: a default for the first time in our nation's history — an economic recession, retirement accounts devastated, and millions of jobs lost," President Joe Biden tweeted Wednesday.
Since taking control of the House in January, Republicans have pushed for spending cuts in order to raise the debt ceiling. House Speaker Kevin McCarthy, R-Calif., told reporters before the vote Wednesday that the bill represents "the largest cut in American history. It's just a small step putting us on the right track."
A group of trade associations representing broker-dealers, banks, asset managers and related financial institutions, including the Investment Company Institute, Managed Funds Association, and the Securities Industry and Financial Markets Association, welcomed the debt ceiling deal.
"America's capital markets are the strongest, deepest and most liquid in the world, and we should not do anything to jeopardize that," the groups said in a joint statement Tuesday. "It is critically important that the United States stand fully behind its obligations. Failure to do so would immediately ripple through the financial system and do irreparable harm to the U.S. economy."
Now, attention turns to the Senate where Majority Leader Chuck Schumer, D-N.Y., and Minority Leader Mitch McConnell, R-Ky., have each endorsed the bill, but time is running short.