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US House Passed Debt Ceiling Bill: What it Means for Americans

The current debt limit is $28.4 trillion, this bill has increased the borrowing limit by $2.5 trillion

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The US House of Representatives has passed a crucial Debt Ceiling Bill, paving the way for the government to continue borrowing money to fund its operations. Read on to learn more about the implications of this important legislation.

The US House of Representatives has passed a bill to raise the debt ceiling, the legal limit on how much the federal government can borrow, by $2.5 trillion. The bill, which was approved by the Senate last week, now heads to President Joe Biden’s desk for his signature.

The debt ceiling is the legal limit on how much the federal government can borrow to pay its bills, such as interest on its debt, Social Security benefits, military salaries, and other obligations. If Congress does not raise or suspend the debt ceiling before it is reached, the Treasury Department would run out of cash and would have to prioritize some payments over others, risking defaulting on some of its obligations.

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The current debt limit is $28.4 trillion, which was reached in August. Since then, the Treasury has been using extraordinary measures to avoid defaulting on its payments, such as suspending investments in federal retirement funds and delaying payments to state and local governments.

However, these measures were expected to run out by mid-December, putting the US at risk of a historic default that could trigger a global financial crisis and damage the country’s credit rating. To avoid this scenario, Congress needed to either raise or suspend the debt ceiling before the deadline.

The US House of Representatives has passed a bill to suspend the federal government’s $31.4 trillion debt ceiling until January 2025, averting a potential default that could have triggered a global financial crisis. The bill, which was negotiated by President Joe Biden and House Speaker Kevin McCarthy, also includes some spending cuts and reforms to address the long-term fiscal challenges facing the country.

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The bill that passed the House on Tuesday would increase the debt limit by $2.5 trillion, enough to cover the government’s borrowing needs until after the 2022 midterm elections. The bill was passed with a vote of 221-209, mostly along party lines. Only one Republican, Representative Adam Kinzinger of Illinois, voted in favor of the bill, while no Democrats voted against it.

The bill’s passage marks the end of a months-long standoff between Democrats and Republicans over the debt ceiling issue. Democrats argued that raising the debt ceiling was a bipartisan responsibility since it reflects spending and revenue decisions made by both parties in the past. They also pointed out that raising the debt ceiling does not authorize new spending, but only allows the government to pay for what it has already agreed to spend.

Republicans, on the other hand, refused to cooperate with Democrats on raising the debt ceiling, saying that they wanted to use it as leverage to force Democrats to scale back their ambitious social spending and climate change agenda. They also accused Democrats of being fiscally irresponsible and adding trillions of dollars to the national debt through their stimulus and infrastructure bills.

The impasse was finally broken last week, when Senate Minority Leader Mitch McConnell offered a short-term solution that allowed Democrats to raise the debt ceiling with a simple majority vote, instead of the usual 60 votes needed to overcome a filibuster. McConnell said he did this to prevent a default and protect the country’s economy but also warned that Republicans would not help Democrats with the debt ceiling again.

A default would have severe consequences for the US economy and its global standing. It could cause interest rates to spike, stock markets to plunge, credit ratings to downgrade, and confidence to erode. It could also disrupt the payments to millions of Americans who rely on federal programs and services, such as veterans, seniors, contractors, and federal employees. Moreover, it could damage the reputation of the US dollar as the world’s reserve currency and undermine the credibility of the US government as a reliable borrower.

By passing the bill to suspend the debt ceiling, the House has avoided these risks and ensured that the government can continue to pay its bills on time and in full. The bill also provides some fiscal relief by capping some discretionary spending over the next two years, rescinding some unused COVID-19 funds, streamlining the permitting process for certain energy projects, and expanding work requirements for some food assistance programs. According to the Congressional Budget Office, these measures would result in $1.5 trillion in savings over a decade.

However, the bill is not a permanent solution to the underlying problem of rising debt and deficits. The US debt-to-GDP ratio is projected to reach 107% by 2031, the highest level in history. The main drivers of this trend are the aging population, rising healthcare costs, and low revenues relative to spending. To address these challenges, Congress will need to enact more comprehensive reforms that balance spending and revenues over the long term.

The bill’s passage is a relief for Biden and his administration, who have been facing multiple challenges and crises in recent months, such as rising inflation, supply chain disruptions, the coronavirus pandemic, and low approval ratings. However, it also sets up another potential showdown over the debt ceiling next year, when Republicans could try to use it as a political weapon against Democrats ahead of the midterm elections.

The bill now heads to the Senate, where it is expected to pass with bipartisan support and be signed into law by President Biden before Monday’s deadline. The bill is a welcome step to avoid a default and protect the economic recovery from the pandemic. However, it is also a reminder that more works needs to be done to put the US fiscal house in order and ensure its long-term prosperity.

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