The U.S Senate passed a $2.5 trillion debt ceiling increase that now goes to the U.S House to avoid the threat of U.S default until at least after the 2022 midterms.
According to NY Times, The U.S Senate voted to increase the U.S debt ceiling by $2.5 trillion along party lines. The bill now goes to the U.S House.
However, the United States would need to intervene on the debt ceiling issue after the 2022 midterm elections.
The president’s political party usually loses ground in midterms, leaving them to try to pass the most ambitious legislation during the first two years of their presidency.
The vote passed the U.S Senate by 50–49, with all Democratic senators voting for the debt ceiling increase while all Republican senators voted against it.
One Republican senator was absent from the vote to increase the U.S debt ceiling.
Last week, 14 Republican senators joined with the Democrats to vote for the bill that created a one-time process to raise the U.S debt ceiling with a simple majority instead of 60 votes (10 votes from the minority party).
Since the United States usually runs into a budget deficit, it must borrow to pay its bills.
According to CNN, Treasury Secretary Janet Yellen warned last month that the U.S government would run out of money by December 15, 2021.
If the United States defaults, it could go under a recession, borrowing would be more costly for consumers, and many benefits like Medicare could get delayed.
Many people would lose their jobs, and consumer spending would decrease since more people would focus more on saving money and paying higher interest rates.
The U.S unemployment rate would rise again after months of declining, and the U.S credit rating would go down.
Many people do not want the U.S to default on its debt.
Republicans have refused to vote for a debt ceiling increase under the Biden administration, despite that they voted for past debt ceiling increases under the former Trump administration.
A while ago, some Republicans were more willing to let the United States default on its debt rather than cooperating with the Democrats to raise or suspend the debt ceiling.
U.S Senator Mitch McConnell from Kentucky denounced $2.2 trillion Biden’s Build Back Better Act, worrying that the U.S could accumulate more debt and worsen inflation.
However, some Democratic senators have considered a wealth tax on billionaires to pay for the Build Back Better Act, which should ease the debt concern.
Moreover, many U.S senators from both political parties are millionaires, so many oppose a wealth tax on wealthy people.
For now, the United States does not need to worry about defaulting on its debt, but the issue can come back sometime after the 2022 midterms.