Last week, the upper House or the Senate passed the debt ceiling bill, which Republican lawmakers have vowed to block at the lower house. However, Republicans failed to do so as the bill passed the House of Representatives after garnering a total of 314 bipartisan votes, with only 117 GOP lawmakers voting against the bill.
Upon reaching the Senate, the bill that allows Pres. Biden’s administration to borrow additional money to use in paying up its maturing obligations, passed the Senate House by garnering a total of 63 bipartisan votes vs. 17 opposition votes. Thereafter, the 2023 Debt Ceiling Bill was sent to the White House and subsequently approved last Friday by Pres. Joe Biden, who remarked:
“Senators from both Democratic and Republican parties voted for a bill that aims to prevent the US government from defaulting in its obligations, and to protect the hard-earned economic progress achieved by the country.”
What Exactly is a Debt Ceiling Bill
Fundamentally, Debt Ceiling refers to the maximum amount that an entity like a government can borrow, by issuing debenture bonds. A debenture bond is a debt instrument that enables an organization or corporation to borrow in the form of interest-bearing financial instrument without need to put up a collateral . The promise to pay is backed by a guarantee that no default will transpire once the obligation falls due.
In cases when an entity becomes bankrupt, holders of debenture bonds have first priority to receive settlement once the assets of the borrower have been liquidated.
It’s important therefore for the US government under Pres. Biden’s administration to raise funds that will see to the settlement of all maturing obligations. The need to raise the debt ceiling comes in light of the financial, economic and social challenges that the government had to hurdle and overcome after the global pandemic
The 2023 Debt Ceiling Bill is an act of Congress that suspend⁸s the current $31.4 trillion debt limit effective up to January 2025. The suspension allows the US government to raise money through the issuance of government bonds for unlimited amounts but enough to cover the country’s maturing obligations or debts. The passing of the bill ensures the avoidance of another Congressional squabble until after the next presidential administration is in place.
Yet the Debt Ceiling suspension remains to be tested by the new spending levels that Congress will approve for the government’s annual budget.