- The Senate approved a short-term debt limit extension through early December, sending it to the House.
- The move marks a reversal for Sen. McConnell, who previously urged the GOP to block Democrats' efforts.
- The deal punts the risk of a government default to December, when Congress will have to raise the ceiling again.
- See more stories on Insider's business page.
The Senate approved a measure to extend the debt limit through early December, defusing a perilous showdown that brought the US to the edge of default. The bill now goes to the House for a vote sometime next week.
The tally was 50-48 with every Senate Republican opposed to the measure during final passage. But 11 GOP senators, including Senate Minority Leader Mitch McConnell, joined Democrats to cut off debate and break the filibuster's 60-vote threshold in an initial procedural vote.
"Republicans played a risky and partisan game, and I am glad their brinkmanship didn't work," Senate Majority Leader Chuck Schumer of New York said in a floor speech.
McConnell reversed course on Wednesday afternoon, offering Democrats a short extension to avoid a looming government default. The Kentucky Republican had been blocking Democrats' efforts to raise the ceiling since early last week. Thursday's vote marks a reversal from that stance and arrived just 11 days before the government's estimated deadline.
It raises the debt ceiling by $480 billion, letting the government continue borrowing freely until December, according to Treasury Department estimates.
Many Republicans were unhappy with McConnell's olive branch and the party struggled to scrounge up enough votes to cross the 60-vote threshold to end debate.
"We need to be able to get on this," Sen. Lisa Murkowski of Alaska told Insider. "The only way we're gonna be able to get on this is if we can get 60 votes. I'm gonna be one of those 60."
Most Senate Republicans were lined up in opposition to the debt limit extension. "Debt is not the friend of the American public and we should resist it," Sen. Rand Paul of Kentucky told Insider.
The debt ceiling is the statutory cap on how much the government can borrow to repay its bills. Suspending the limit gives the US more time to pay its bills for pandemic stimulus and other key aid programs from the last two years. If Congress fails to raise the limit, the government can default on its debt and plunge the US into a new economic crisis.
Thursday's deal essentially kicks the can down the road, leaving Congress where it started heading into the holiday season. Democrats are still reluctant to use the time-consuming reconciliation process to lift the limit on their own. And McConnell was adamant on Wednesday that Republicans won't offer any more support.
"This will moot Democrats' excuses about the time crunch they created and give the unified Democratic government more than enough time to pass standalone debt limit legislation through reconciliation," he said in a statement.
Senate Republicans had maintained that Democrats must unilaterally raise the debt ceiling, arguing the GOP wants no part in financing the $3.5 trillion social spending plan. But Democrats argued that raising the ceiling is a bipartisan responsibility. Doing so would cover debt incurred from both the Trump and the Biden administrations, including President Donald Trump's $900 billion stimulus package from last December.
Democrats ramped up the pressure on the GOP throughout the week. President Joe Biden lambasted Republicans for their obstruction on Monday, and spoke with business leaders on Wednesday about the harm of a potential government default.
"Not only are Republicans refusing to do their job, they're using their power to prevent us from doing our job of saving the economy from a catastrophic event," Biden said during the Monday press conference. "I think, quite frankly, it's hypocritical, dangerous, and disgraceful."
Brace for December deadlines
The GOP started to blinked on Wednesday as Democrats explored several options for raising the ceiling on their own. One solution to emerge was a one-time change to the filibuster that would let Democrats raise the limit with a party-line vote. Biden floated blowing a hole in the filibuster on Tuesday, telling reporters it was "a real possibility" to avoid a federal default.
It may very well have forced McConnell's hand. "It's not an insignificant part of the calculation, I'm quite sure," Sen. Kevin Cramer of North Dakota told Insider in an interview.
The minority leader has long warned that eliminating or weakening the filibuster would plunge the Senate into chaos. Moderate Democrats Joe Manchin and Kyrsten Sinema were strongly opposed to any filibuster changes, but pressure on them to reverse course would likely intensify as the country hurtled toward the October 18 deadline.
While the deal only delays an inevitable debt-ceiling battle until the winter, it also staves off a horrific economic threat. Failure to raise the ceiling would be calamitous. Government funding would quickly freeze for Social Security beneficiaries, members of the armed services, and public workers. The country would slide into a recession and lose nearly 6 million jobs, Moody's Analytics estimated. American household wealth would plummet by $15 trillion as fears of a government default could tank stocks.
Hitting the ceiling would also be disastrous for the country's global strength. The US dollar serves as the world's reserve currency, and its power relies on trust in the government to pay its debt.
Nothing would be "more harmful" to the currency than a default, Treasury Secretary Janet Yellen warned September 27. The dollar would quickly lose its relevance, interest rates would shoot higher, and Americans' payments on everything from credit-card bills to home loans would soar, she added.