Senate suspends debt ceiling in new 2-year budget passage

The United States Senate on Thursday suspended debt ceiling in a two-year budget deal as more Republicans voted in favor of the deal than against it, by a margin of 30-23 with five Democrats voting ‘No”.

The agreement stands as a rare example of bipartisan legislating in President Donald Trump era, and is one of the few major votes Congress will take this year.

Republican leaders including Trump himself had been working to round up GOP support ahead of Thursday’s vote, trying to avoid a repeat of the outcome in the House last week, when a majority of Republican lawmakers ignored Trump’s pleas and voted against the deal.

The agreement heads off several looming fiscal threats, most immediately the possibility that the Treasury Department could have run out of money to pay its bills as early as September if Congress didn’t act, resulting in a market-shattering default on U.S. obligations.

The deal passed on Thursday suspends the debt ceiling through July 31, 2021, removing the threat of default and the accompanying risk of political brinkmanship that typically accompanies debt limit negotiations. It lifts strict Obama-era spending caps that would otherwise slash indiscriminately into agency and military budgets, and sets overall spending levels that will make it easier for lawmakers to write the individual appropriations bills needed to keep the government open past Oct. 1, when current agency budgets expire.

The deal passed Thursday increases military and domestic spending by $320 billion over two years compared to existing law. It increases overall discretionary spending from $1.32 trillion in fiscal 2019 to $1.37 trillion in 2020 and $1.375 trillion in 2021.

The government spends more money than it brings in through revenue, and it covers the difference by issuing debt. But the Treasury Department can only issue debt up to a limit set by Congress, known as the debt ceiling. If the debt ceiling is not lifted, the government could fall behind on some of its payments, which could spark another financial crisis.

The government now spends roughly $4.4 trillion and is expected to bring in roughly $3.5 trillion in revenue, leaving a gap of between $900 billion and $1 trillion.

Trump had — before coming president — suggested that the debt ceiling shouldn’t be raised. But in the current round of negotiations, Treasury Secretary Steven Mnuchin argued for the need to ensure stability by raising the debt ceiling, and he prevailed over budget hawks in the administration such as acting budget director Russell Vought who were pushing for significant cuts to accompany the deal.

GOP supporters of the budget pact, including Trump and Majority Leader Mitch McConnell (R-Ky.), focused on lifting the debt ceiling as well as the increase in the Pentagon budget in arguing that the agreement was a good deal for Republicans, and the best that could be achieved under divided government.

But a number of Senate Republicans, including some who support Trump strongly on most issues, were reluctant to go along. The national debt now stands at $22 trillion, but the deal makes no attempt to rein in spending, take on entitlements, or make any structural changes many Republicans say are necessary to reform Washington’s dysfunctional budget process.

“I’m worried about the staggering debt we’re leaving for our children and grandchildren,” said Sen. Rick Scott (R-Fla.). “Too often in Washington, compromise means both sides get everything they want so that no one has to make a tough choice. I can’t support that.”

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Many Democrats, however, praised the deal for heralding the end of the Budget Control Act of 2011, which was meant to exert fiscal discipline on Washington by imposing strict spending caps known as the “sequester.” Instead, lawmakers came together on a bipartisan basis every two years to increase spending over the caps, increasingly without bothering to pay for it. The current deal represents the last such move under the Budget Control Act before its expiration.