Biden signs an extension of the debt limit. The problem starts again in December.
President Joe Biden has signed a bill that provides for a temporary increase in the country’s borrowing limit, thus avoiding an impending government default.
The bill, which passed the House on Tuesday, increases the debt ceiling by $ 480 billion, enough to fund the treasury until early December. The move leads to more political confrontation over the borrowing limit until Dec. 3, when Congress will also have to agree on a government funding bill to avoid a shutdown.
“Congress is once again on a course that will likely lead to difficult, recurring and highly partisan debt ceiling negotiations,” DBRS Morningstar said in a statement. “The incentives for compromise are very strong, even if only at the last hour.”
The rating agency confirmed the US debt rating to AAA on Friday, saying it viewed the likelihood of an actual default as “very low,” in part because the Treasury and Federal Reserve would do whatever it takes. in their power to avoid it.
“Nonetheless, recurring debt ceiling battles increase the potential for miscalculations,” DBRS Morningstar said in a statement.
Treasury Secretary Janet Yellen had warned Congress for months that the government was on track to default if the debt ceiling was not raised.
The House had previously passed two other bills that raised the debt ceiling, but both were blocked by Senate Republicans who refused to increase the borrowing limit unless Democrats kill the bill. Biden’s $ 3.5 trillion social spending law.
Senate Minority Leader Mitch McConnell (R.-Ky.) did an about-face last week, offering to allow Democrats to pass a temporary debt ceiling measure through a simple majority vote without invoking obstruction to 60 votes. McConnell has been criticized by his fellow Republicans. Texas Republican Ted Cruz called the minority leader’s about-face a “strategic mistake.”
After the measure was passed in a party line vote, McConnell wrote a letter to Biden warning him that he would not support a similar measure in December.
“I will not participate in any future effort to mitigate the consequences of Democratic mismanagement,” McConnell wrote last Friday in a letter to Biden. “Your lieutenants on Capitol Hill now have the time they claimed lacked to settle the debt ceiling through stand-alone reconciliation and all the tools to do it.”
Democratic leaders have said they are loath to use reconciliation to break the debt ceiling, even though they would use the process to pass Biden’s sweeping social spending bill. Reconciliation circumvents the rule of filibuster and allows the party to pass a law by a simple majority vote.
“I call for a strong bipartisan vote for this legislation and to protect the economic strength of American working families,” said House Speaker Nancy Pelosi (D. Calif.) In a speech Tuesday.
In a note on Friday, analysts at Citigroup said they believed there was a “significant chance” that the debt ceiling would be raised through reconciliation.
The bill signed by Biden Thursday night will allow the Treasury to replenish its “extraordinary measures”, which it has been using since early August. Citigroup analysts estimate that the Treasury currently has about $ 100 billion in extraordinary measures in addition to the $ 480 billion provided for in the bill.
“We don’t expect the firm debt ceiling to be tied until Jan. 3,” analyst Veronica Clark wrote in a note. “Market attention will however be focused on when the extraordinary measures will be exhausted – we expect that to happen in mid-December.”
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