US avoids credit default with agreement to increase debt ceiling

The US Congress approved on Wednesday an increase in the federal debt ceiling, thus avoiding the threat of a credit default a few hours before the deadline set by the Treasury department.

A deeply divided Senate voted Tuesday to raise the cap by $ 2.5 trillion, and the House of Representatives followed suit early Wednesday, allowing the administration to meet its payments through early 2023.

“Without taking risks, without default on the debt, without risk of another recession: the responsible government won on this extremely important issue”Declared Senate Democratic Leader Chuck Schumer before the vote.

“The American people can breathe easy because there will be no default”He added.

The text approved by both houses of Congress is the result of several days of negotiation and was presented only a few hours before its adoption in Congress. The forecast is to raise the debt limit to just over US $ 31 trillion.

Only the enactment by Joe Biden remains for it to be effective.

The question was urgent. If the cap was not raised before Wednesday, the United States could not honor its payments to its creditors. It would have been an unprecedented situation that would leave world finance in uncharted territory.

Temporary relief for Biden

Both parties believed that increasing the debt ceiling is harmful, but recognized that not doing so would plunge the US economy into a depression.

Raising America’s debt capacity is normally a formality, but the procedure has become the subject of difficult transactions in Congress in recent months.

Republicans understood that passing it would be to give a blank check to the Democratic president, whom they accuse of contributing to runaway inflation.

Democrats, for their part, argued that increasing this cap served to repay debts already committed, including billions spent under the Trump presidency.

Finally, the Republican opposition finally gave its endorsement to a complex parliamentary procedure that allowed the Democrats to raise the debt ceiling solely with the votes of their ranks.

In fact, voting in both houses followed party lines, with only one Republican in the Lower House voting to raise the cap and none in the Senate.

The adoption of this new debt ceiling provides relief for Biden, faced with other challenges in Congress.

The main one is its social and ecological program of US $ 1.75 billion with which it wants “rebuild a better America”And save his popularity level, but which has been in parliamentary limbos for months.

The plan, still the subject of important discussions, should be approved by the Senate before Christmas, which heralds turbulent last-minute transactions on Capitol Hill.