US President Joe Biden proclaimed a “crisis averted” on Friday after the passage of a debt ceiling bill to avoid the first-ever default in the world's largest economy and a financial emergency spanning the globe.
“Essential to all the progress we’ve made in the last few years is keeping the full, faith, and credit of the United States and passing a budget that continues to grow our economy and reflects our values as a nation,” he said in his first-ever address to the nation from the White House Oval Office.
“That’s why I’m speaking to you tonight, to report on a crisis averted and what we are doing to protect America’s future. Passing this budget agreement was critical. The stakes could not have been higher if we had failed to reach an agreement on the budget.”
Mr Biden's remarks came after Congress approved a debt ceiling bill that would suspend the nation's $31.4 trillion borrowing limit for two years, avoiding a historic default.
The Senate late on Thursday voted 63-36 to approve the bill, a day after it was passed by the House of Representatives.
Mr Biden said he will sign the budget deal into law on Saturday, ahead of the projected default date of June 5.
The President stressed the bipartisan nature of the bill, in a bid to end the rancorous bickering that engulfed Washington for the last four months as the deal was negotiated.
“I know bipartisanship is hard, and it is hard, but we can never stop trying,” Mr Biden said.
“Because the moments like this one, one we just faced where the American economy and the world economy is at risk of collapsing, there's no other way, no matter how tough our politics gets, to see each other as not as adversaries but as fellow Americans to treat each other with dignity and respect to join forces.”
Senate majority leader Chuck Schumer on Thursday expedited the bill through the upper chamber by allowing 11 amendments to the bill – which had all failed.
He and minority leader Mitch McConnell also issued a joint statement to soothe fears that caps on defence spending would not hinder US support for Ukraine.
“We’ve saved the country from the scourge of default,” Mr Schumer said after the vote.
Approval in the Senate ends weeks of political brinkmanship and grandstanding in Washington that threatened the status of the US economy.
“There were extreme voices threatening to take America for the first time in our 247-year history into a default on our national debt,” Mr Biden said.
“Nothing, nothing would have been more irresponsible. Nothing would have been more catastrophic. Our country would have been thrown into recession.”
As the deadline drew closer, the Treasury Department had to adopt extreme measures to keep afloat, such as auctioning three-day cash management bills.
On Friday, the department was set to auction $15 billion worth of one-day cash management bills to be issued on June 5.
The Treasury had a balance of $37.4 billion on May 30, its lowest since 2017. It was not able to borrow money since the debt limit was reached in January.
“Congress has a duty to ensure that the United States can pay its bills on time and I continue to strongly believe that the full faith and credit of the United States must never be used as a bargaining chip,” Treasury Secretary Janet Yellen said.
Ms Yellen, the White House and economic analysts have repeatedly warned of the dangers of a US debt default, adding urgency to talks between Mr Biden and House Speaker Kevin McCarthy.
A default would have unleashed chaos on the world's largest economy, plunging it into a recession and raising unemployment while its effects also would have reverberated around the world.
“A default would have caused severe hardship for American families, potentially leading to the loss of millions of jobs and trillions in household wealth, and higher financing costs for American taxpayers for years to come,” Ms Yellen said.
Those fears appear to be unrealised, for now, with the debt ceiling agreement suspending the borrowing limit through to the 2024 US presidential election.
But the economy is still not out of the woods.
Credit agency Fitch on Friday kept the country's “AAA” credit rating on “Rating Watch Negative”, saying the continued brinkmanship in Washington reduces confidence in the government's ability to deal with its fiscal responsibilities.
“In fact, there has been a steady deterioration in governance over the last 15 years, with increased political polarisation and partisanship as witnessed by the contested 2020 election, repeated brinkmanship over the debt limit and failure to tackle fiscal challenges from growing mandatory spending has led to rising fiscal deficits and debt burden,” the agency said.
Hardline Republicans wanted the bill to do more to cut spending and roll back social programmes, while progressive Democrats fretted over new work requirements for Americans receiving food aid and permitting reforms for energy projects.
The bill also rescinds unspent funds from the Covid-19 emergency and cuts back on spending for the Internal Revenue Service, two major priorities for Republicans.
“No one got everything they wanted but the American people got what they needed. We averted an economic crisis and an economic collapse,” Mr Biden said.
The non-partisan Congressional Budget Office reported the bill would reduce deficits by $1.5 trillion over the next decade.
