President Biden signed Senate Joint Resolution 33 into law today, raising the limit on the amount of money the United States can borrow to cover past debt by $2.5 trillion. This is expected to allow the government to avoid default until early 2023.
Full Text of S.J. Res. 33
Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That the limitation under section 3101(b) of title 31, United States Code, as most recently increased by Public Law 117–50 (31 U.S.C. 3101 note), is increased by $2,500,000,000,000.
The process was complicated but the deal is done and the result, surprisingly simple. Although congressional legislation is often made up of hundreds of pages of confusing legalese, S.J. Res. 33 takes up less than half a page and contains about 44 words, the most powerful of which are: ... "is increased by $2,500,000,000,000."
With the stroke of a pen, Congress and the president have avoided a fiscal crisis and the possibility of defaulting on trillions of dollars in debt (for now). The debt ceiling resolution signed into law today—coupled with a temporary funding measure passed Dec. 3—will allow the government to appropriate funds through Feb. 18, 2022, and pay its bills until early 2023. Signing of the bill is good news for the Biden administration, as one more piece of legislation is taken off the table ahead of the upcoming Christmas holiday.
- President Biden signed the $2.5 trillion debt ceiling resolution raising the debt limit to nearly $31 trillion.
- The debt ceiling controls the amount of money the government can borrow by issuing bonds.
- The money can only be used to pay off already accumulated debt, not for new spending.
- Before raising the debt ceiling, Treasury employs "extraordinary measures" to shuffle funds around to pay debt.
- The process this time was complicated requiring multiple pieces of legislation.
- Failure to raise the debt limit would result in the U.S. defaulting on its debt, a catastrophic outcome for the United States of America and the world.
How the Debt Ceiling Works
The debt ceiling, or debt limit, is the maximum amount of money the United States can raise (borrow) by selling bonds. When the accumulated debt gets close to the debt limit, the U.S. Treasury shuffles money around in a process known as "extraordinary measures" in order to keep the government afloat while paying the bills.
On Nov. 16, 2021, Treasury Secretary Janet Yellen sent a letter to Congress informing it that the debt ceiling would likely be reached shortly after Dec. 15, 2021. At that time Yellen began implementing "extraordinary measures." When extraordinary measures are insufficient, the next step is to raise the debt ceiling. This is what just happened.
Negotiations and a Complex Plan
Facing twin deadlines of Dec. 15 for the debt ceiling and Dec. 31 for the National Defense Authorization Act (NDAA), members of Congress negotiated a complicated plan to raise the debt limit and pass the defense funding bill.
Tuesday, Dec. 7. The House of Representatives, by a vote of 222-212, passed a measure to fast-track raising the debt ceiling in the Senate by 51 votes. Another measure, the NDAA passed by a vote of 363-70.
The debt ceiling fast-track was in the form of an amendment to Senate Bill 610, legislation designed to delay Medicare sequestration cuts. The version sent back to the Senate included a one-time provision that would allow the Senate to raise the debt limit with a simple majority vote.
The amendment sent to the Senate had to win approval with at least 60 votes. Once passed, the amendment would allow Senators to vote to raise the debt limit by a simple 51 vote majority.
The defense authorization act was a separate measure but one expected to clear the Senate since it was sent from the House "locked-in" meaning no amendments would be allowed.
Thursday, Dec. 9. As expected, the Senate, by a vote of 60 to 40, passed the House amendment allowing a simple majority vote on the debt ceiling. The Senate also passed the separate NDAA with both measures then ready to go to the White House for President Biden's signature.
The signing of S. 610, including the House amendment, allowed both houses of Congress to vote on raising the debt ceiling. As approved, the debt ceiling amendment required that Democrats specify the dollar amount by which they wanted to raise the limit. The expedited procedure was set to expire after Jan. 16, 2022.
Friday, Dec. 10. President Biden signed the debt ceiling fast-track measure on Friday, Dec. 10. This allowed Congress to approve the final resolution which the President signed today.
The Bottom Line
By signing the $2.5 trillion debt ceiling increase, President Biden and Congress raised the amount the government can borrow to pay the country's debt. Raising the debt limit from more than $28 trillion to almost $31 trillion, provides fiscal accommodation for the cost of the Build Back Better Act (BBBA) legislation, should it pass before Feb. 18, 2022.
With or without the expense of the BBBA, it's only a matter of time before the new debt ceiling is reached and the often contentious process of raising it again begins anew.