The U.S. House of Representatives passed bipartisan legislation to suspend the nation’s debt limit through Jan. 1, 2025, despite vocal opposition on both sides of the aisle.
The Fiscal Responsibility Act, a fiscal package put together by President Joe Biden, House Speaker Kevin McCarthy (R-Calif.), and their teams of negotiators, overwhelmingly cleared the lower chamber with a 314–117 vote.
More Democrats voted for the bill than Republicans by a margin of 165 to 149. Of those opposing the package, 71 members were from the GOP caucus and 46 were Democrats.
McCarthy championed the bill on the House floor on May 31, telling fellow lawmakers that this “is a crucial first step for putting America back on track.”
“It does what is responsible for our children, what is possible in divided government, and what is required by our principles and promises,” he added. “Yes, it may not include everything we need to do, but it is absolutely what we need to do right now.”
House Majority Leader Steve Scalise (R-La.) echoed McCarthy’s sentiment, telling reporters at a news conference after the vote that this is just the beginning of restoring fiscal responsibility in Washington after the vote.
“This is the first step. This is a down payment on the other things that we’re going to start doing,” Scalise said. “But none of those things would be possible if we didn’t start tonight with the action that was taken by this House in this majority.”
Rep. Patrick McHenry (R-N.C.), the House Financial Services Committee chairman, called it “the most conservative spending package” during his time in Congress.
Headed to the Senate
The package now heads to the Senate ahead of a June 5 deadline. Senate Majority Leader Chuck Schumer (D-N.Y.) planned to initiate the debt ceiling bill process on June 1. However, it could still take several days to travel through the Senate, depending on the senators and their positions on the matter.“There’s been a very good vote in the House. I hope we can move the bill quickly here in the Senate and bring it to the president’s desk as soon as possible,” Schumer said.
Biden urged the upper chamber “to pass it as quickly as possible” to prevent a default and keep the nation’s economic recovery intact.
“This agreement is good news for the American people and the American economy,” he said in a statement.
Several senators have expressed disappointment and revealed they intend to vote against the Biden-McCarthy bill.
Speaking on the Senate floor on May 31, Sen. Mike Lee (R-Utah) called it a “fake response to burdensome debt” and confirmed that he “will emphatically vote ‘No.’”
“One cannot help be seized by a sense of awful foreboding,” the senator said. “Instead of confronting this existential threat head-on, this deal is wracked with complacency and false cowardly compromise.”
“The fact of the matter is that this bill is totally unnecessary,” he wrote. “The president has the authority and the ability to eliminate the debt ceiling today by invoking the 14th Amendment.”
“Sixty percent of Americans say Congress should only raise the nation’s debt ceiling if it cuts spending at the same time. I would guess the Americans answering that poll meant real cuts in spending, not an annual increase of one percent above already bloated levels of COVID-19 spending,” Paul said in a statement on May 30.
Markets
The leading U.S. stock market indexes were relatively flat in overnight trading.Treasury yields were mostly up across the board in after-hours trading as the odds of House passage appeared high. The benchmark 10-year yield rose more than 3 basis points to nearly 3.67 percent. The one-month bill rose 11 basis points to just below 5.32 percent, and the six-month bill surged 6.1 basis points to 3.525 percent.
Economists, market analysts, and government officials warned of the economic consequences of the U.S. government’s defaulting on its debt, listing a sharp recession, higher interest rates, and millions of lost jobs as some of the ramifications.
Last week, Treasury Secretary Janet Yellen pushed the debt limit deadline to June 5, noting in a letter to McCarthy that the Department would “have insufficient resources to satisfy the government’s obligations” without suspending or increasing the debt limit.
Analysts say that investors will now concentrate on the June Federal Reserve policy meeting. It remains uncertain whether the Federal Open Market Committee will vote to raise interest rates by 25 basis points or hit the pause button.