U.S. House passes debt ceiling deal as default threat looms

Veering away from a default crisis, the U.S. House overwhelmingly approved a debt ceiling and budget cuts package, sending the deal that President Joe Biden and Speaker Kevin McCarthy negotiated to the Senate for swift passage in a matter of days, before a fast-approaching deadline.

Washington rushing after long slog of debate to ensure government can keep paying its bills

A large group of people is visible in a room. Some are using recording devices. A large chandelier is overhead.
U.S. House Speaker Kevin McCarthy returns to his office at the U.S. Capitol after a procedural vote ahead of a final vote in the U.S. House of Representatives on a bill raising the federal government's $31.4 trillion US debt ceiling, in Washington on Wednesday. (Julia Nikhinson/Reuters)

Veering away from a default crisis, the U.S. House overwhelmingly approved a debt ceiling and budget cuts package, sending the deal that President Joe Biden and Speaker Kevin McCarthy negotiated to the Senate for swift passage in a matter of days, before a fast-approaching deadline.

The hard-fought compromise pleased few, but lawmakers assessed it was better than the alternative — a devastating economic upheaval if Congress failed to act. Tensions ran high as hard-right Republicans refused the deal, but Biden and McCarthy assembled a bipartisan coalition to push to passage on a robust 314-117 vote late Wednesday.

"We did pretty dang good," McCarthy, a California Republican, said afterward.

Amid deep discontent from Republicans who said the spending restrictions did not go far enough, McCarthy said it is only a "first step."

Default would happen Monday

Biden, watching the tally from Colorado Springs where he is scheduled to deliver the commencement address at the U.S. Air Force Academy on Thursday, phoned McCarthy and the other congressional leaders after the vote. In a statement, he called the outcome "good news for the American people and the American economy."

Washington is rushing after a long slog of debate to wrap up work on the package to ensure the government can keep paying its bills and prevent financial upheaval at home and abroad. Next Monday is when the Treasury has said the U.S. would run short of money and risk a dangerous default.

Biden had been calling lawmakers directly to shore up backing. McCarthy worked to sell skeptical fellow Republicans, even fending off challenges to his leadership.

A silver-haired man in a suit and tie and wearing sunglasses stands in front of people and microphones outside.
U.S. President Joe Biden talks to reporters as he departs the White House on May 26 in Washington. (Chip Somodevilla/Getty Images)

A similar bipartisan effort from Democrats and Republicans will be needed in the Senate to overcome objections.

Overall, the 99-page bill would make some inroads in curbing the nation's deficits as Republicans demanded, without rolling back Trump-era tax breaks as Biden wanted. To pass it, Biden and McCarthy counted on support from the political centre, a rarity in divided Washington.

A compromise, the package restricts spending for the next two years, suspends the debt ceiling into January 2025 and changes some policies, including imposing new work requirements for older Americans receiving food aid and greenlighting an Appalachian natural gas line that many Democrats oppose. It bolsters funds for defence and veterans, and guts new money for Internal Revenue Service agents.

'You cut a deal that shouldn't have been cut'

Raising the nation's debt limit, now $31 trillion US, ensures Treasury can borrow to pay already incurred U.S. debts.

Top Republican Party deal negotiator Rep. Garret Graves of Louisiana said Republicans were fighting for budget cuts after the past years of extra spending, first during the COVID-19 crisis and later with Biden's Inflation Reduction Act, with its historic investment to fight climate change paid for with revenues elsewhere.

But Republican Rep. Chip Roy, a member of the Freedom Caucus helping to lead the opposition, said, "My beef is that you cut a deal that shouldn't have been cut."

For weeks negotiators laboured late into the night to strike the deal with the White House, and for days McCarthy has worked to build support among skeptics. At one point, aides wheeled in pizza at the Capitol the night before the vote as he walked Republicans through the details, fielded questions and encouraged them not to lose sight of the bill's budget savings.

The speaker has faced a tough crowd. Cheered on by conservative senators and outside groups, the hard-right House Freedom Caucus lambasted the compromise as falling well short of the needed spending cuts, and they vowed to try to halt passage.

A much larger conservative faction, the Republican Study Committee, declined to take a position. Even rank-and-file centrist conservatives were unsure, leaving McCarthy searching for votes from his slim Republican majority.

Trump holds his fire

Ominously, the conservatives warned of possibly trying to oust McCarthy over the compromise.

One influential Republican, former president Donald Trump, held his fire: "It is what it is," he said of the deal in an interview with Iowa radio host Simon Conway.

House Democratic leader Hakeem Jeffries said it was up to McCarthy to turn out Republican votes in the 435-member chamber, where 218 votes are needed for approval.

A man in suit and tie raises an index finger as he speaks.
U.S. House Democratic leader Hakeem Jeffries speaks at a news conference on Capitol Hill on Wednesday. (Julia Nikhinson/Reuters)

As the tally faltered on an afternoon procedural vote, Jeffries stood silently and raised his green voting card, signalling that the Democrats would fill in the gap to ensure passage.

"Once again, House Democrats to the rescue to avoid a dangerous default," said Jeffries, a New York Democrat.

"What does that say about this extreme MAGA Republican majority?" he said about the party aligned with Trump's "Make America Great Again" political movement.

Liberal discontent

Then, on the final vote hours later, Democrats again ensured passage, leading the tally as 71 Republicans bucked their majority and voted against it.

The nonpartisan Congressional Budget Office (CBO) said the spending restrictions in the package would reduce deficits by $1.5 trillion over the decade, a top goal for the Republicans trying to curb the debt load.

In a surprise that complicated Republicans' support, however, the CBO said their drive to impose work requirements on older Americans receiving food stamps would end up boosting spending by $2.1 billion over the time period. That's because the final deal exempts veterans and homeless people, expanding the food stamp rolls by 78,000 people monthly, the CBO said.

Liberal discontent, though, ran strong as nearly four-dozen Democrats also broke away, decrying the new work requirements for older Americans, those 50-54, in the food aid program.

Some Democrats were also incensed that the White House negotiated into the deal changes to the landmark National Environmental Policy Act and approval of the controversial Mountain Valley Pipeline natural gas project. The energy development is important to Sen. Joe Manchin, D-W.Va., but many others oppose it as unhelpful in fighting climate change.

On Wall Street, stock prices were down Wednesday.

A silver-haired man gestures as he speaks at a podium with two microphones.
McCarthy speaks at a news conference after the House passed the debt ceiling bill Wednesday. (Jose Luis Magana/The Associated Press)

In the Senate, Democratic Majority Leader Chuck Schumer and Senate Republican leader Mitch McConnell are working for passage by week's end.

Schumer warned there is "no room for error."

Senators, who have remained largely on the sidelines during much of the negotiations, are insisting on amendments to reshape the package. But making any changes at this stage seemed unlikely with so little time to spare before Monday's deadline.