The Republican-run House of Representatives approved a debt-ceiling bill in a 217-215 vote on Wednesday evening, marking one step in a process that’s getting closely watched by traders worried about a possible U.S. default.
The bill, dubbed the Limit, Save, Grow Act, aims to raise the limit on federal borrowing for a year while also cutting spending. President Joe Biden and his fellow Democrats have said the lift should be made without spending cuts or other conditions, but House Speaker Kevin McCarthy and his fellow Republicans have insisted on the reductions.
Ahead of Wednesday’s vote, House Majority Leader Steve Scalise, a Louisiana Republican, told reporters that top GOP lawmakers wanted to pass the bill “as soon as possible, but more importantly, we want President Biden to finally start getting engaged in this process.”
Analysts have cautioned that the measure largely represents an opening salvo that’s expected to be followed by negotiations.
“Just to underscore, this bill is a ‘messaging’ and ‘process’ bill that has no chance of becoming law,” Chris Krueger of TD Cowen Washington Research Group wrote in a note. “This is not a secret. Even so, the House GOP is twisting itself into knots to pass — the final, actual bill that raises the debt ceiling following passage in the Senate is going to be MUCH more challenging.”
White House Communications Director Ben LaBolt criticized the latest version of the GOP debt-limit bill, saying in a statement that McCarthy “has cut a deal with the most extreme MAGA elements of his party.”
The measure would roll back a range of Democratic policies, such as student-debt cancellation and climate-related investments. Overnight, top Republicans agreed to make last-minute changes — removing a proposed repeal of tax breaks for ethanol and backing a faster launch for new work requirements for recipients of some government aid.
Biden told reporters on Wednesday afternoon that he’s “happy to meet with McCarthy, but not on whether or not the debt limit gets extended — that’s not negotiable.”
On Tuesday, Treasury Secretary Janet Yellen warned of severe economic consequences if Congress does not act to lift the debt ceiling, saying a default on U.S. debt would raise the cost of borrowing “into perpetuity.” In January, she said the Treasury had started to use “extraordinary measures” because the federal government had run up against its ceiling for borrowing.
closed mostly lower Wednesday as robust earnings from tech companies boosted the Nasdaq Composite
but concerns about First Republic Bank
weighed on the broader market.
Now read: Debt-ceiling standoff: Here’s what’s next as Democrats and Republicans warn about U.S. default
And see: U.S. debt-ceiling deadline may come sooner than expected, Goldman warns
Plus: Here’s how anxiety over the U.S. debt ceiling may play out in markets
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