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Schumer Says Deal Struck to Extend Debt Limit Into December

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What You Need to Know

  • The deal staves off immediate crisis but could put Democrats in political peril as they try to pass a massive spending package.
  • It would raise the statutory debt ceiling by $480 billion.
  • Stocks rose on the news.

Senate leaders have reached agreement on a deal that staves off any default on federal payments into December.

“We’ve reached agreement to extend the debt ceiling through early December and it is our hope to get this done as soon as today,” Senate Majority Leader Chuck Schumer said Thursday morning.

The plan would raise the statutory debt ceiling by $480 billion, according to a Senate aide. The amount would allow the Treasury to meet obligations through Dec. 3, the same day that the current short term government spending bill runs out.

The announced deal comes after weeks of partisan brinkmanship over how to raise the debt ceiling, which Treasury Secretary Janet Yellen has warned would be breached around Oct. 18 without legislative action.

U.S. stocks extended gains on the news, with the S&P 500 Index rising to a session high. It was up 1.4% as of 11:03 a.m. in New York.

While the agreement averts an immediate crisis, it means the partisan battle over the debt will be rejoined just as Congress will be confronting the deadline to keep the government open and Democrats are likely to be trying to get an infrastructure bill and a massive tax and spending plan through the House and Senate, with their slim majorities.

That could be politically perilous for Democratic lawmakers still sharply divided over President Joe Biden’s $4 trillion worth of economic plans — particularly for moderates in swing states who worry about the overall cost.

Minority Leader Mitch McConnell first offered the deal on Wednesday and leaders negotiated the details into Thursday. On the Senate floor Thursday, he said Republicans still want to force Democrats to raise the debt ceiling in December using a process known as reconciliation, which would leave Republicans entirely removed from the process — and from any political fallout.

Schumer has rejected that idea, saying raising the debt limit should be a bipartisan responsibility. He had argued that there wasn’t enough time before the mid-October deadline. The process would take about two weeks, according to budget experts.

McConnell’s short-term debt-limit move was designed to call the Democrats’ bluff while showing Republicans were willing to be flexible, according to a person familiar with this thinking.

“Now there will be no question. They will have plenty of time,” McConnell said Thursday.

Pictured: Senate Majority Leader Chuck Schumer, D-N.Y. (Photo: Bloomberg)

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