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WASHINGTON — A divided Senate on Tuesday voted to take up legislation to raise the debt ceiling by $2.5 trillion, with Republicans unanimously opposed to staving off the threat of a first-ever federal default until at least early 2023.
All Democrats supported taking up the measure, which was expected to pass the 50-50 Senate along party lines later on Tuesday, sending it to the House for final passage and then to President Biden for his signature.
The swift action came a week after party leaders announced a deal establishing a one-time, fast-track process to increase the debt ceiling on a simple majority vote, instead of the 60 votes needed to move most legislation through the Senate.
The vote occurred with little time to spare before a potential default, which would be catastrophic for the national economy and jeopardize the full faith and credit of the United States. The Treasury Department had warned that it would be unable borrow to finance the nation’s bills soon after Wednesday, and the agency is currently using so-called “extraordinary measures,” a series of fiscal tools to delay the threat of a default.
Senator Chuck Schumer of New York, the majority leader said on Tuesday that the $2.5 trillion figure would be enough to punt the threat of another federal default past the midterm elections next year, an assessment shared by the Treasury Department, according to a person familiar with its internal estimates. The debt limit is currently set at $28.9 trillion, and covers debt incurred by administrations from both parties.
“The American people can breathe easy and rest assured there will not be a default,” Mr. Schumer said in a speech on the Senate floor on Tuesday morning. He thanked Republicans, including Senator Mitch McConnell of Kentucky, the minority leader, for their help in setting up the process and resolving one more must-pass piece of fiscal legislation before the end of the year.
A handful of Republicans, while opposed to the debt limit increase, ended their party’s monthslong blockade of debt-limit legislation last week by voting to create the expedited process. Republicans had spent months refusing to allow Democrats to take action on long-term legislation raising the debt ceiling, using the filibuster to stall any action.
In his own remarks on Tuesday, Mr. McConnell made no mention of the deal he struck with Mr. Schumer, beyond noting that the debt ceiling would be raised solely with Democratic votes. Instead, he denounced Mr. Biden’s $2.2 trillion social safety net, climate, tax package that is making its way through Congress, warning that it would exacerbate inflation and prompt the accumulation of more debt.
“If they jam through another reckless taxing and spending spree, this massive debt increase will just be the beginning,” Mr. McConnell said. “More printing and borrowing — to set up more reckless spending to cause more inflation, to hurt working families even more. The American people need a break.”
But Mr. McConnell has also fielded criticism from his right flank about allowing Democrats to steer the country away from a fiscal catastrophe.
Understand the U.S. Debt Ceiling
What is the debt ceiling? The debt ceiling, also called the debt limit, is a cap on the total amount of money that the federal government is authorized to borrow via U.S. Treasury bills and savings bonds to fulfill its financial obligations. Because the U.S. runs budget deficits, it must borrow huge sums of money to pay its bills.
Why does the U.S. limit its borrowing? According to the Constitution, Congress must authorize borrowing. The debt limit was instituted in the early 20th century so the Treasury did not need to ask for permission each time it needed to issue bonds to pay bills.
What would happen if the debt limit was hit? Treasury Secretary Janet Yellen told Congress that inaction on raising the debt limit could lead to a self-inflicted economic recession and a financial crisis. She also said that failing to raise the debt ceiling could affect programs that help millions of Americans, including delays to Social Security payments.
Do other countries do it this way? Denmark also has a debt limit, but it is set so high that raising it is generally not an issue. Most other countries do not. In Poland, public debt cannot exceed 60 percent of gross domestic product.
What are the alternatives to the debt ceiling? The lack of a replacement is one of the main reasons the debt ceiling has persisted. Ms. Yellen said that she would support legislation to abolish the debt limit, which she described as “destructive.” It would take an act of Congress to do away with the debt limit.
Former President Donald J. Trump railed against Mr. McConnell in a series of statements over the weekend, charging that he “didn’t have the guts to play the debt ceiling card, which would have given the Republicans a complete victory on virtually everything.”
And he continued to urge Republicans to depose Mr. McConnell from his leadership role.
On Monday, Kelly Tshibaka, a hard-line conservative challenging Senator Lisa Murkowski, Republican of Alaska, pledged that she would not support Mr. McConnell if elected in 2022, citing his role in the debt ceiling process.
Ms. Murkowski, after voting to set up the fast-track maneuver, appeared unbothered by the prospect of having it used against her.
“I’ve just got to do the best thing that I can for the country,” she told reporters. “And this is the best thing for the country — to avoid a default.”
Alan Rappeport contributed reporting.
