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The Senate has sent an approved bill to President Biden, allowing the government to borrow without a debt ceiling for nearly 2 years.
The Senate has officially passed a bill that raises the US debt ceiling only a few days before an official debt default. Members of the Senate approved the bipartisan deal to raise the debt ceiling in a 63-36 vote. The Senate’s approval is the last barrier before President Joe Biden’s assent.
Biden’s expected signature saves the United States from a June 5 default. According to the Treasury Department, the US would have begun suffering outstanding bills if the Senate had not decided by then, or had rejected the bill.
Before the Senate’s approval, the US debt ceiling was $31.4 trillion. Following President Biden’s eventual assent, the government will be able to borrow unlimited amounts for two years until January 2025. According to the Congressional Budget Office, the debt ceiling deal will also reduce federal expenses by $1.5 trillion over the next 10 years.
The Senate approval is a culmination of efforts at resolving the debt ceiling deliberations because of the effects of a default. Treasury Secretary Janet Yellen agreed with Biden and other leaders in Congress that a default would have been problematic. The first of its kind in the country’s history, this default would have significantly affected global financial markets. In the US, likely effects include an increase in interest rates on mortgages and credit cards, as well as job losses. The US may also have entered a recession.
Biden praised the Senate’s decision to avoid the default, saying in a statement:
“No one gets everything they want in a negotiation, but make no mistake: This bipartisan agreement is a big win for our economy and the American people.”
Biden will sign the approval on Friday and also address the country at 7 pm E.T.
Raising the US Debt Ceiling before the Senate’s Approval
Last weekend, Biden and House Speaker Kevin McCarthy agreed to begin proceedings to raise the US debt ceiling. Their agreement resulted from continuous deliberations between the aides of both politicians over several weeks. Following an official agreement, European markets responded positively and opened higher on Monday. The CAC40 in France and Germany’s DAX both recorded pre-trade increases of 0.5%. Before this, the Stoxx Europe 600 had suffered an 8-week low.
On Wednesday, the US House of Representatives passed the debt ceiling deal and sent it to the Senate for approval. The vote ended with disapproval from 71 Republicans, which usually would suspend partisan attempts. However, the 165 Democrats who voted in favor – with 16 votes more than the 149 Republicans who approved – saved the day. The vote passed the House of Representatives at 314 to 117.
Yesterday, Coinspeaker reported BlackRock CEO’s opinion on the debt ceiling. According to Laurence Fink, the “drama” that has followed the increase in the US debt ceiling will negatively affect the dollar. Fink believes the government is eroding trust in the dollar and “jeopardizing its reserve currency status”.