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Bipartisan Agreement Raises US Debt Ceiling Amid Economic Challenges

A comprehensive look at the recent US debt ceiling bill showcases the balance of power and economic implications.

Kevin McCarthy and Joe Biden
Kevin McCarthy and Joe Biden

Bipartisan Support Backs Debt Ceiling Bill in House

The US House of Representatives, though politically divided, approved a bill to suspend the $31.4 trillion debt ceiling recently. This important move, backed by Democrats and Republicans, was a significant step to ward off opposition from hardline conservatives and prevent a disastrous default. This bipartisan agreement is critical to prevent the federal government from running out of funds to cover its expenses.

Senate to Act Before Deadline

Having secured broad support in the Republican-dominated House, the legislation must now pass through the Senate before reaching President Joe Biden for final approval. This process is pressed for time, as the federal government is expected to run out of money to pay its bills after the looming Monday deadline.

Mixed Responses to the Debt Ceiling Agreement

The debt ceiling bill, a compromise between President Biden and House Speaker Kevin McCarthy, faced opposition from 71 staunch Republicans. However, the support from 165 Democrats outweighed the 149 Republican votes in its favor, enabling the bill's passage. Despite this victory, some progressive Democrats and hardline Republicans expressed concerns about aspects of the bill.

Implications of the New Legislation

The bill temporarily removes the federal borrowing limit until January 1, 2025, effectively setting aside this politically sensitive issue until after the 2024 presidential election. Additionally, it aims to cap some government spending for two years, expedite the approval process for specific energy projects, recover unused COVID-19 funds, and expand work requirements for certain food aid programs.

Debate and Vote: Senate's Next Move

With both party leaders expressing hope to pass the bill before the weekend, the Senate might face delays due to possible amendment votes. Any changes could delay the process, potentially stretching the Senate debate and voting into the weekend.

US House of Representatives
US House of Representatives

Impacts and Critiques of the Bill

The legislation, while projected to result in $1.5 trillion in savings over a decade, falls short of the $4.8 trillion savings goal set by Republicans. Some progressives have objected to the bill regarding an energy pipeline and additional work requirements. The bill also plans to redirect some funding away from the Internal Revenue Service, although this is not expected to hinder tax enforcement significantly.

National Debt and Economic Forecast

The debt-ceiling standoff has prompted rating agencies to consider a potential downgrade of US debt, a cornerstone of the global financial system. Several agencies warned of a possible downgrade, similar to the debt-ceiling standoff in 2011. The federal deal does not aim to curb the growth of fast-growing programs such as health and retirement costs.

A Win-Win Scenario?

Despite the criticism, the bill contains some wins for Republicans and Democrats. It largely maintains President Biden's infrastructure and green-energy laws and implements less severe spending cuts and work requirements than Republicans initially wanted. The legislation also allows for increased military spending over the next two years.