Biden signs debt ceiling bill into law, averting default

US President signs bill into law, extending the renewing borrowing through December 2023

Joe Biden averted a potential US debt default and safeguarded the nation's economy amidst challenging bipartisan negotiations. Reuters

Joe Biden signed a debt ceiling bill passed by Congress after weeks of wrangling to avert a catastrophic, self-induced default in the world's biggest economy.

The Fiscal Responsibility Act of 2023 authorises the government to extend the so-called debt ceiling to renew borrowing and allow the payment of government bills.

The Treasury had warned that if the debt ceiling was blocked beyond Monday, the country would default on its $31 trillion debt.

A default would have likely triggered market panic, huge job losses and a recession, with global implications.

In a statement Saturday, the White House thanked the Republican and Democratic leaders in Congress “for their partnership.”

In a rare Oval Office address, Mr Biden said that the debt ceiling bill saved the country from “economic collapse”.

Speaking from behind the historic Resolute Desk on live prime-time television, Mr Biden said the deal resolving the standoff between Democrats and Republicans was a compromise where “no one got everything they wanted.”

However, “we averted an economic crisis,” he said.

Oval Office addresses have always been reserved by presidents for moments of unique national danger or importance.

Mr Biden used the occasion to project a reassuring, calm tone.

He praised his opponents for negotiating in good faith and promised Americans that he had never felt more optimistic.

Failure to reach a deal in time would have had disastrous effects across the entire global financial system. Reuters

Mr Biden said that Congress has now preserved “the full faith and credit of the United States.”

But even with the House and Senate putting aside differences to finally rush through the agreement last week, the US economy's reputation took a hit.

Ratings agency Fitch said Friday that it is keeping the United States' “AAA” credit rating on negative watch, despite the deal.

The debt ceiling is usually an uncontroversial accounting manoeuvre approved yearly by Congress.

It allows the government to keep borrowing money to pay for bills already incurred.

This year, hard-right Republicans opted to exploit their party's narrow majority in the House of Representatives to use the must-pass vote as leverage, forcing Mr Biden into accepting cuts to many Democratic spending priorities.

This triggered a test of political strength that threatened to end in chaos before the two sides agreed this week on raising the debt ceiling while freezing some budgetary spending in return – but stopping well short of Republican demands for cuts.

Kevin McCarthy, the speaker of the Republican-led House, had touted the compromise bill as a big victory for conservatives, although he faced a backlash from hardliners on the right who said he made too many concessions.

Mr Biden, who is campaigning for re-election in 2024, sees the dramatic resolution to the crisis as a win, showcasing his negotiating powers and his pitch to be the moderate voice in an increasingly extreme political landscape.

He burnished those credentials in the speech by going out of his way to praise Mr McCarthy, a politician long loyal to former president Donald Trump – the man Biden defeated in 2020 and who is seeking his own return in 2024.

“I want to commend Speaker McCarthy. You know, he and I, we and our teams, were able to get along, get things done,” Mr Biden said.