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WASHINGTON – Senate leaders announced Thursday an agreement to extend the government’s borrowing authority through December to temporarily avert an unprecedented national bankruptcy that experts say has devastated the economy.
“Our hope is to get this done as soon as possible,” said Senate Majority Leader Chuck Schumer when he opened the Senate.
In their agreement, Republican and Democratic leaders stepped out of a dangerous stalemate over the lifting of the nation’s credit limit, with Democratic senators accepting an offer from Senate GOP leader Mitch McConnell.
McConnell made the offer a day earlier, just before Republicans were ready to block longer-term debt ceiling suspension laws, and when President Joe Biden and business leaders raised concerns that a default would disrupt government payments to millions of people and topple the nation would be in a recession.
The Senate leaders had worked late into the night to work out the details.
“The Senate is making progress,” McConnell said Thursday.
Wall Street continued to recover on the news. The S&P 500 was up 1.5% through noon and the Nasdaq composite, which is heavily weighted in technology stocks, was up 1.8%.
The deal sets the stage for some sort of continuation in December when Congress again faces urgent deadlines to fund the government and raise the debt ceiling before heading home on vacation.
The deal will allow the debt ceiling to be raised by about $ 480 billion, according to a Senate assistant familiar with the negotiations, who spoke on condition of anonymity to discuss them. That is the level that the Treasury Department has said is needed to get to December 3rd.
“Basically, I’m glad Mitch McConnell finally saw the light,” said Bernie Sanders, the independent Vermont senator, late Wednesday. The Republicans had “finally done the right thing, and at least we now have a few months to come to a permanent solution.”
Senator Chris Murphy, D-Conn. Added that, provided that the final details of the emergency legislation are in place, “we will continue to make it clear over the next three months that we are ready to continue voting to make our payments pay bills and Republicans aren’t. “
Unsurprisingly, McConnell put it differently.
“The path our Democratic counterparts have taken will save the American people any short-term crisis while finally resolving the majority’s apology for lack of time to tackle the debt ceiling through (reconciliation),” McConnell said Thursday. “Now there will be no question: you will have plenty of time.”
Congress has only days to act before the October 18 deadline, when the Treasury Department warned it would quickly run out of funds to deal with the country’s already accrued debt.
McConnell and the Senate Republicans have insisted that Democrats go alone to raise the debt ceiling and allow the Treasury Department to renew its loans so the country can meet its financial obligations. Additionally, McConnell has insisted that the Democrats use the same cumbersome legislative process called reconciliation that they used to pass a $ 1.9 trillion COVID-19 relief bill in an attempt to get Biden’s 3.5 trillion US dollar measure adopted to strengthen safety net, health and environmental programs.
McConnell said in his offer on Wednesday that Republicans would continue to insist that the Democrats use the reconciliation process for a long-term extension of the debt ceiling. However, he said Republicans are ready to “speed up” this process, and in the meantime, Democrats could use the normal legislative process to pass a short-term extension of the fixed dollar debt ceiling to match current spending levels through December cover.
While he continues to blame the Democrats, his offer will also allow Republicans to avoid the condemnation they would have received from some quarters if a financial crisis strikes.
Early Wednesday, Biden urged business leaders to push for the debt ceiling to be suspended immediately.
At an event in the White House, the President shamed Republican senators for threatening to stop any suspension of the government borrowing agency’s $ 28.4 trillion ceiling. He relied on the credibility of Corporate America – a group traditionally affiliated with the GOP on tax and regulatory issues – to make his point clear when the chiefs of Citi, JP Morgan Chase, and Nasdaq gathered in person and practically cleared the debt pronounced limit must be abolished.
“It’s not right and it’s dangerous,” Biden said of the Republican resistance in the Senate.
His moves came amid talks that Democrats might try to change Senate filibuster rules to bypass Republicans. But Senator Joe Manchin, DW.Va., on Wednesday reiterated his opposition to such a change and likely took it off the table for the Democrats.
Business leaders reiterated Biden’s arguments that the stalemate must be ended as soon as possible, while avoiding partisan tensions. Both portrayed the debt ceiling as an avoidable crisis.
“We can’t wait until the last minute to resolve this issue,” said Jane Fraser, CEO of Bank Citi. “We’re just playing with fire right now, and our country has suffered so much in recent years. The human and economic costs of the pandemic are enormous, and we don’t need a disaster of our own. “
Ahead of the White House meeting, the government warned that it could spark an international financial crisis that the United States may not be able to handle if the credit limit is not extended.
“A default would send shock waves through global financial markets and likely cause credit markets to freeze worldwide and stock markets to collapse,” the White House Economic Advisory Council said in a new report. “Employers around the world should probably start laying off workers.”
The recession that could be triggered could be worse than the 2008 financial crisis as many nations are still grappling with the COVID-19 pandemic, the report said.
Raising the debt ceiling was once a routine affair and has become politically treacherous in the last decade or more, particularly by Republicans to rail against government spending and rising debt burdens.
AP writer Alan Fram in Washington and AP economics writer Damian J. Troise in New York contributed to this report.