US Republicans pass debt ceiling bill in lower house

The US House of Representatives — which has a majority of Republican members — narrowly passed a bill on Wednesday to raise the US debt ceiling by $1.5 trillion (roughly €1.4 trillion) in exchange for sweeping spending cuts over the next decade.

The lower house saw a 217-215 vote in favor of the bill marking a partial win for House Speaker Kevin McCarthy as the deadlock over increasing the US borrowing limit spooks financial markets.

However, the bill is highly unlikely to become law since it must also pass the Democratic-led Senate. And US President Joe Biden also said that he would veto the bill if it passed the upper house. Democrats and the White House insist that an increase in the debt ceiling should come without conditions, saying it's not reasonable to try to use the prospect of an unprecedented default on US debt to secure spending concessions.

What next for the US debt ceiling?

McCarthy now hopes to negotiate the bill with President Biden.

"We've done our job," McCarthy said at the Capitol after the vote. "The president can no longer ignore by not negotiating. Now he should sit down and negotiate."

The US Treasury Department could run out of money within a matter of weeks if Congress fails to raise the debt ceiling, rendering it unable to pay bills.

The requirement to regularly secure congressional approval to increase US national debt, now well over 100% of GDP at around $31.7 trillion, means this has become a recurring headache in Washington in recent years if the president's party does not control both houses of Congress.

In 2011, a similar standoff between the two parties led to a downgrade of the government's credit rating, even though the US managed to avoid defaulting on debt. It roiled financial markets, pushed borrowing costs higher and hammered investments.

Biden has indicated that while he's open to meeting McCarthy, it will not be to negotiate the bill.

"Happy to meet with McCarthy, but not on whether or not the debt limit gets extended," Biden said as the House debated the measure. "That's not negotiable."

Sweeping cuts

The 320-page bill would permit either another $1.5 trillion or continued borrowing until March 31 next year, whichever stage is reached first. This would set up a repeat of the debate and partisan standoff in the months leading up to next November's presidential elections. 

In exchange for this brief borrowing reprieve, it calls for a return to 2022 expenditure levels and a cap on spending increases at 1% a year, the repeal of some renewable energy tax incentives and tougher work requirements for some antipoverty programs.

White House Press Secretary Karine Jean-Pierre said Biden would not sign off on such cuts.

"President Biden will never force middle-class and working families to bear the burden of tax cuts for the wealthiest, as this bill does," she said in a statement. "The president has made clear this bill has no chance of becoming law."

mk/kb (Reuters, AP)