The US Senate voted to temporarily extend the debt ceiling on Wednesday, avoiding a default that could have major consequences for both the global economy and the country’s reputation. The bill passed with 79 votes in favor of extending borrowing authority until February 7th 2017, following an amendment introduced by Senator Pat Toomey R-PA which extends it until March 1st 2017 if no budget agreement is reached before then.
The measure now goes to the House, which will vote on a companion bill on Thursday or Friday. It’s expected to pass there as well, though some conservative members may still try to stall it along the way. The US Treasury is set to exhaust its borrowing authority on November 3rd, and without this extension Congress would have had only about two months to come up with a viable plan to raise the debt limit.
An attempt by conservatives in Congress to attach conditions to the bill was voted down, meaning that some $8 billion of disaster relief funding for areas affected by Hurricane Matthew will go ahead as part of this deal. The Senate had already passed an aid package on Tuesday night, after which the focus turned to whether or not there was enough support in Congress for a clean debt limit extension.
The White House applauded the Senate’s move, saying it would help ensure we continue to have the flexibility we need to protect against unanticipated disruptions and maintain economic growth. It added that President Obama would sign the measure if it reached his desk in its current form.
Some critics however point out that the bill only extends the debt limit until mid-February, meaning this is no long term solution and giving Congress less time to debate a longer timeframe for dealing with America’s growing national debt. The US Treasury Secretary Jack Lew had previously requested a full four year extension in order to provide greater clarity and certainty.
The debt limit was first introduced in 1917, and Congress has since voted to raise it more than 70 times . The current ceiling stands at $19,808 billion. The last time Congress failed to raise the debt limit it led to Standard & Poor’s downgrading the US credit rating for the first time in history, which had significant consequences for borrowing costs and global markets.
The Treasury Department says it will begin using what it calls extraordinary measures on November 5th if Congress doesn’t vote to raise the borrowing limit before then, which means they can still continue to meet existing obligations for a few weeks after that date.