US Default Crisis Likely Averted... Senate Passes Bill Raising Government Debt Ceiling to $2.5 Trillion

Chuck Schumer, U.S. Senate Majority Leader of the Democratic Party
Photo by Reuters Yonhap News

[Asia Economy Reporter Park Byung-hee] The U.S. Senate passed a bill on the 14th (local time) to raise the federal government debt ceiling to $31.4 trillion, allowing the U.S. federal government to avoid a debt default crisis.

On the same day, the Senate held a full session and approved the bill to raise the federal government debt ceiling by $2.5 trillion from the previous $28.9 trillion with 50 votes in favor and 49 against. All Democratic senators and two independent senators leaning toward the Democrats voted in favor.

The House of Representatives plans to complete the vote on the bill within the day and send it to President Joe Biden. Since the House has a Democratic majority, the bill is expected to pass smoothly.

Once the bill passes the House as well, the U.S. federal government will narrowly avoid the default crisis just one day before the deadline warned by the Treasury Department expires. Last month, Treasury Secretary Janet Yellen stated that if the federal government debt ceiling is not raised, the debt limit would be exhausted by the 15th.

The U.S. federal government, which has been steadily increasing its fiscal deficit, has avoided default crises by either raising the debt ceiling or suspending its application.

During former President Donald Trump's administration in July 2019, the application of the debt ceiling was suspended for two years. As that deadline expired on July 31 this year, the risk of a federal government default resurfaced. The U.S. Congress raised the federal government debt ceiling by $480 billion last October and increased it again by $2.5 trillion this time. Given the large increase this time, controversies surrounding the federal government default risk are expected to subside for a while.

Since the Joe Biden administration, which aims for a big government, is continuously pushing large-scale stimulus bills, the Republican Party is expected to keep criticizing the government and the Democrats over the large fiscal deficit issue ahead of the midterm elections at the end of next year.

On the other hand, the Democrats respond by pointing out that the tax cuts during the Trump administration significantly contributed to the increase in the federal government's fiscal deficit. The U.S. Tax Policy Center estimated that the federal government's fiscal deficit increased by $1 to $2 trillion due to the Trump administration's tax cuts. Adding the spending for COVID-19 response toward the end of his term, some analyses suggest that the federal government's fiscal deficit increased by $7.8 trillion during Trump's four years in office.

Senate Majority Leader Chuck Schumer of the Democratic Party said after passing the debt ceiling increase bill, "This bill is to pay off the debt that both Democrats and Republicans have accumulated," adding, "I am glad that Democrats and Republicans worked together."

This content was produced with the assistance of AI translation services.