US Congress passes debt ceiling lift, avoids historic default

The Congress of U.S approved on Thursday night, the 1st, the suspension of the country’s debt ceiling of US$ 31.4 trillion (about R$ 158 trillion), after weeks of tense negotiations and just four days before the deadline to avoid the threat of a disastrous ‘default’. There were 63 votes in favor and 36 against, with that, it gives a breather to the North American president, Joe Biden, and it means that the debt issue will only return to the political debate after the 2024 presidential elections. “No one gets everything they want in a negotiation, but make no mistake: this bipartisan agreement is a great victory for our economy and for the American people,” said US President Joe Biden in a statement released on social media. He also informed that he will promulgate the law “as soon as possible” and will address the nation this Friday, 2. If the Chamber of Deputies, which is divided, had not reached an agreement, this could be one of the biggest defaults in history of the US, which had the potential to turn into something bigger and destabilize not only the US economy, but also financial markets around the world. If it defaulted, the government would be prevented from borrowing more money and paying all its bills,

Senate Majority Leader Chuck Schumer said the country can “breathe a sigh of relief” after avoiding a “catastrophic” economic meltdown. “But with all the ups and downs, twists and turns, it took to get here, it’s so good for the country that the two parties were able to come together to avoid default,” he added. Kevin McCarthy, the Republican who is speaker of the House of Representatives, said the bill, negotiated for several weeks, was a big victory for conservatives, despite the criticism he received from far-right congressmen, who accused him of making too many concessions . Economists had warned that the country could run out of liquidity to pay its obligations from Monday, the 5th, which left a narrow margin for the enactment of the Fiscal Responsibility Law, which extends the country’s debt authorization until 2024, in exchange for a cut in federal spending. Democratic leaders spent months warning of the collapse that the first ‘default’ in US history could provoke, including the loss of millions of jobs and nearly $15 trillion in household wealth, as well as rising mortgage costs and of other loans.

The bill — which heads to Biden’s office for enactment — ended a day of intense negotiations between party leaders and members of the caucuses, who had threatened to pass the bill quickly with last-minute complaints about the details. The debt limit has been raised more than 100 times to allow the government to meet its spending commitments, generally without protest and with the support of Democrats and Republicans alike. Both parties consider that raising the debt limit is politically toxic, but recognize that not adopting the measure would lead the American economy to a recession, with catastrophic effects for world markets. Republicans had hoped to use the debt increase as a campaign tool and criticize what they see as excessive Democratic government spending ahead of the 2024 presidential election, although the debt ceiling increases only cover commitments already made by the two parties.