A crunch deal to raise the US debt ceiling has been voted through by the House of Representatives.
The agreement – which aims to avert a potentially catastrophic scenario where the US defaults on its national debts – passed through the Republican-majority House by 314-117 votes.
The proposal will now move to the Senate. The Senate’s majority leader, Chuck Schumer, has vowed to move quickly to pass the bill.
It needs to be on President Joe Biden’s desk by Monday’s deadline – the point at which the US federal government is expected to run out of money to pay its bills.
“This agreement is good news for the American people and the American economy,” President Biden said after the vote.
“I urge the Senate to pass it as quickly as possible so that I can sign it into law.”
What is the debt limit – and why does it matter?
The main purpose of the deal is to increase the US debt limit from $31.4trn (£25.3trn) – which it achieves by suspending the borrowing limit until January 2025 rather than setting a new level.
It also averts a situation where the US defaults on its national debts – a scenario that would have huge impacts both for the US and the wider world economy.
US Treasury Secretary, Janet Yellen, previously warned that without a deal to suspend the debt ceiling, the US would not have enough money to meet all of its financial obligations by 5 June.
That would mean civil servant wages, social welfare payments, health insurance – known as Medicare – would go unpaid.
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Joe Biden and House Speaker Kevin McCarthy reach US debt ceiling deal
If the US no longer pays interest on its bonds – IOUs it issued to raise funds – it would default on debt payments and its credit rating would fall.
A vital way the country raises money – selling bonds – would also be at risk due to the insecurity will markets would charge more to lend to the US.
Economists warn that a prolonged period where the US cannot pay its bills would lead to a nearly 20% drop in stock prices – and an economic contraction of up to 4%.
Bipartisan deal
Wednesday’s vote comes after Mr Biden and leader of the House of Representatives, speaker Kevin McCarthy, reached an agreement over the country’s debt ceiling.
In order to secure the agreement, the Democrats were forced to make concessions to the typically pro-small-state Republicans, including spending cuts and policy concessions.
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In a speech before the vote, Mr McCarthy praised the bill’s budget cuts, which he said were needed to curb Washington’s “runaway spending”.
Despite his praise of the deal, it drew opposition from 71 hardline Republicans. That would normally be enough to block partisan legislation, but 165 Democrats backed the measure and pushed it through.