Senate races to pass debt-limit deal to avoid first-ever default

The Senate was poised to pass the bipartisan debt ceiling agreement struck by President Biden and House Speaker Kevin McCarthy as early as Thursday night, preparing to send it to Mr. Biden’s desk just days before the nation was projected to make a first-ever default on its bills.

Senate Majority Leader Charles E. Schumer scrambled to quell opposition from defense hawks, climate-conscious Democrats and hard-line Republicans, all while expediting the Senate’s time-consuming legislative procedures with little room for error.

The two parties struck an agreement to allow 11 amendment roll call votes Thursday evening, demanded by Republicans and one Democrat, in exchange for fast-tracking the bill to final passage later in the night. The chamber had to pass the legislation, which cleared the Republican-led House Wednesday and suspends the debt limit until January 2025, before next week or risk the country defaulting on its ability to pay all of its bills.

“For all the ups and downs and twists and turns it took to get here, it is so good for this country that both parties have come together at last to avoid default,” said Mr. Schumer, New York Democrat.

The amendments, most of which required a 60-vote threshold, were all but certain to fail. Any changes by the Senate would force the bill back to the House, scuttling Washington’s ability to meet its Monday default deadline set by the Treasury Department.

“Any change to this bill that forces us to send it back to the House would be entirely unacceptable,” Mr. Schumer said. “It would almost guarantee default.”

The show votes on amendments were crucial to strike agreement among all 100 senators to expedite the bill.

The biggest group that Mr. Schumer worked to win over were defense hawks such as Sen. Lindsey Graham, a South Carolina Republican who blamed House Republicans for not raising defense spending enough in the debt-limit deal. Mr. Schumer agreed to advance a  supplemental military funding bill at a later date.

“For three days, I and some others have been screaming to high heaven that what the House did was wrong,” said Mr. Graham. “It’s right to want to control spending, and there’s some good things in this bill. But it was wrong to give a defense number inconsistent with the threats we face.”

Senators from both parties, particularly defense hawks, were also upset with the deal’s provision for a 1% cut across the entire federal government if Congress fails to pass into law its annual budget by Jan. 1. The last time Congress approved a budget on time and did not require a stopgap funding measure was 1996.

Senators said an across-the-board cut would severely weaken America’s military and its capacity to aid Ukraine. Republicans also feared the threat could be used as leverage for Democrats to push for more social welfare spending in the appropriations process.

“This bill contains an automatic 1% sequester based off last year’s budget,” said Sen. Tom Cotton, Arkansas Republican. “That means that domestic spending will go up and defense spending will go down if the sequester kicks in.”

The military supplemental deal struck between Mr. Graham and Mr. Schumer would not only include more money for Ukraine but also ensure the Pentagon is not subject to the 1% cut if government funding does not get passed on time.

Mr. Schumer also faced rebellion from fellow Democrats over the debt limit deal’s energy provisions. The lone amendment vote offered by a Democrat will be for a provision from Sen. Tim Kaine of Virginia to strip the measure of its approval of the Mountain Valley Pipeline.

The long-stalled, $6.6 billion natural-gas project is set to run 303 miles from northern West Virginia through southern Virginia. The venture is a pet project of Sen. Joe Manchin III, a West Virginia Democrat who was instrumental in moving Mr. Biden’s climate change law last year.

“I support improving the permitting process for all energy projects,” Mr. Kaine said. ”But Congress putting its thumb on the scale so that one specific project doesn’t have to comply with the same process as everyone else is the definition of unfair and opens the door to corruption.”

Mr. Schumer also allowed an amendment vote from Sen. Rand Paul, Kentucky Republican, to gut the debt-limit deal and replace it with a bill to cut 5% from federal spending every year through 2028.

The bipartisan debt ceiling agreement would raise the $31.4 trillion debt limit until after the 2024 presidential election. It also would claw back billions of dollars in unspent pandemic relief and cut IRS funding by more than $20 billion over two years, out of an $80 billion funding boost the agency received last year. 

Mr. Biden secured a win by keeping domestic spending flat for the upcoming fiscal year in the face of Republican calls for at least $130 billion in immediate cuts. Both sides found bipartisan agreement on boosting defense spending by more than $26 billion.

Republicans scored a victory by forcing Mr. Biden to agree to cap the growth of federal spending at 1% next year.

“We used the power we had to force the president to negotiate,” said House Speaker Kevin McCarthy, California Republican. “We produced a bill that in divided government takes a step toward smaller government, less regulation, more economic growth, and more take-home pay.”

Over in the Senate, Republicans grumbled at the deal touted by Mr. McCarthy.

Sen. Mike Lee accused House Republicans of overhyping the narrative that they reined in spending. The Utah Republican suggested that many rank-and-file took leadership at its word without doing their “own due diligence” to study the deal.  

“Once their own party’s leadership gives their seal of approval and says either, ‘I’m okay with this,’ or ‘I liked this and I want you to vote for this,’ a lot of members will salute and step up and do it because they’re told to do it, believing that it does what they’re told that it does,” Mr. Lee said. “I think far too many people in the House did that without doing their own due diligence.”

The agreement further expands work requirements for recipients of food stamps and direct cash payments until 2030. Able-bodied, childless recipients of each program, age 54 and younger, would have to work at least 20 hours per week to keep their benefits. They also would be subject to new restrictions for how long they can collect the benefits.

The deal excludes veterans and the homeless from the work requirements while expanding their food stamps benefits.

While the new restrictions would save taxpayer money, the expanded benefits for veterans and the homeless would cause overall spending for food stamps to increase. The Congressional Budget Office estimates the changes would cost taxpayers an additional $2.1 billion over the next decade.

Apart from expanding work requirements, the deal institutes a pay-as-you-go provision requiring Mr. Biden to offset rules or regulations that increase federal spending.

Mr. McCarthy has hailed the feature as a win, but GOP critics note that legislation allows the White House to waive it if necessary for efficiency. The bill further states that the administration’s waiver cannot be challenged by the courts.

House Republicans initially sought a $130 billion cut to nondefense spending this year and a decade’s worth of spending caps. They also wanted to cancel Mr. Biden’s student loan forgiveness program and rescind more than $200 billion in green energy tax credits that Democrats passed last year.

Mr. McCarthy has already pledged that the debt limit deal is only a precursor to a fight over budget cuts as Congress begins to assemble this fall’s government funding bill. However, Republican maneuvering will be limited since the debt limit deal sets top-line spending levels for the next two years.