The U.S. will not default, at least for now, after the U.S. Senate passed the Fiscal Responsibility Act of 2023. President Joe Biden is expected to sign the measure, which passed 63 to 36.
The billl was the result of compromise negotiants between the White House and Republican House Speaker Kevin McCarthy to suspend the debt limit through Jan. 1, 2025. For his part, McCarthy is hailing small reductions to discretionary spending and modest increases in defense spending in 2024. Discretionary spending growth is capped at 1 percent for 2025. The compromise allows for the continued growth of the budget and deficit spending.
The bill also makes changes to work requirements for some social welfare programs, streamlines the permitting process to drill for oil and natural gas, and takes back $20 billion of the new $80 billion in IRS funding and $30 billion in unspent COVID relief funds, among other provisions.
The legislation avoids the nation going into default, meaning it will now have enough money to pay the interest on the debt owed primarily to Japan, China and Great Britain and other creditors.
“It is so good for this country that both parties have come together at last to avoid default. I thank my colleagues on both sides of the aisle for their cooperation,” Senate Majority Leader Chuck Schumer (D-N.Y.) said shortly before the vote.
Sen. Minority Leader Mitch McConnell (R-Ky.) called it “an urgent and important step in the right direction for the health of our economy and the future of our country” during remarks on the Senate floor.
Sen. James Lankford (R-Okla.) opposed the bill saying it would actually increase, not decrease, federal spending.
“I get to the fine print and find out, actually, it increases spending 3.3 percent next year. And the year after that it increases spending 1 percent again. It actually doesn’t decrease spending at all,” Lankford said while debating the bill on June 1.
Senator Marsha Blackburn (R-Tenn.) believes the deal will not adequately address “wasteful spending and government overreach.”
“Joe Biden’s offer was a debt ceiling increase with new taxes and without spending cuts, and I commend Speaker McCarthy for fighting back against Biden’s blank check agenda,” Blackburnsaid in a statement.
“No one wants the government to default on our debt, however, I do not believe that the final deal will put enough restraints on Biden’s wasteful spending and government overreach. This deal also does nothing to stop 87,000 IRS agents from harassing hardworking Americans. Furthermore, we should invest in a strong military at a rate that ensures we are fully equipped to take on the Chinese Communist Party.”
In overnight trading, the leading benchmark indexes were little changed after the Senate approved the bill.
–Wire services
