Congress reaches agreement to avert calamitous US debt default
- Breakthrough strategy brokered by Democratic and Republican congressional leaders following months of infighting
- US government would likely to run out of cash on or soon after December 15, Treasury Secretary Janet Yellen has warned
US senators struck a deal on Tuesday to create a one-time law allowing Democrats to lift the nation’s borrowing authority and avert a catastrophic credit default without requiring votes from the opposition Republicans.
The House of Representatives approved the fix in an evening vote and it was expected to be approved by the Senate in the coming days - allowing lawmakers to avert the crisis with a simple 51-vote majority in the upper chamber.
The Bipartisan Policy Center said last week it expected the United States would no longer be able to meet its debt repayment obligations between December 21 and January 28. US Treasury Secretary Janet Yellen has put the deadline even earlier – next Wednesday.
“Nobody wants to see the US default on its debts. As Secretary Yellen has warned, a default could eviscerate everything we’ve done to recover from the Covid crisis,” Democratic Senate Majority Leader Chuck Schumer said on the floor of the chamber.
“We don’t want to see that, I don’t believe we will see that, and I continue to thank all my colleagues for cooperating in good faith to preserve the full faith and credit of the United States.”
America spends more money than it collects through taxation so it borrows money via the issuing of government bonds, seen as among the world’s most reliable investments.