The threat of an imminent US debt default, which could have caused economic chaos across the world, has been removed.
New legislation, which passed its final stage in the US Congress on Thursday night, will allow the federal government to borrow more to pay its bills, just days before it was due to run out of money.
The US Senate on Thursday night passed legislation, which will suspend the official debt ceiling in return for spending restrictions and some other conditions.
The bill had already been passed by the US House of Representatives and will now go to president Joe Biden to sign into law.
The bill, which gives effect to a deal reached last weekend between Mr Biden and the speaker of the House of Representatives Kevin McCarthy, was passed by 63 votes to 36 in the Senate.
Mr Biden said following the vote in the Senate that he would sign the bill into law as soon as possible. He is to make an address to the American public on Friday.
He said members of the Senate had voted “to protect the hard-earned economic progress we have made and prevent a first-ever default by the United States”.
“Together, they demonstrated once more that America is a nation that pays its bills and meets its obligations – and always will be. ”
The president said the bipartisan agreement on the debt ceiling and budget represented “a big win for our economy and the American people”.
“It protects the core pillars of my ‘Investing in America’ agenda that is creating good jobs across the country, fuelling a resurgence in manufacturing, rebuilding our infrastructure, and advancing clean energy. It safeguards peoples’ healthcare and retirement security, protecting bedrock programs like Social Security, Medicare, and Medicaid,” he said.
“It protects vital investments in hardworking families that help make our country strong – from child care and education, to public safety and Meals on Wheels. It protects my student debt relief plan for hardworking borrowers. And it honours America’s sacred obligation to our veterans by fully funding veterans’ medical care.”
The White House had warned that a US debt default would generate widespread turmoil in both the domestic and global economy. It suggested that in a protracted default up to eight million people could lose their jobs as unemployment soared.
Last week treasury secretary Janet Yellen warned the US government would run out of money to pay its bills from Monday if the Congress did not suspend or raise the legal limit on borrowing.
The deal will see the ceiling on the amount the US government can borrow suspended for a two-year period. Crucially for the White House, this will take the issue off the political agenda in the run in to the 2024 presidential election.
In return for the suspension of the debt ceiling, the president and Mr McCarthy agreed a two-year budget deal, which would hold spending flat for 2024 and increase it by one per cent for 2025.
Military spending will increase at a higher rate.
The deal also includes provisions to speed up the permitting process for certain energy projects, to claw back unused Covid-19 funds and expand work requirements for food aid programmes to additional recipients.
