Senator Minority Leader Charles Schumer, (D-NY), (L) and Senate Majority Lead Mitch McConnell, (R-KY), walk side-by-side in the Senate Chamber at Washington's U.S. Capitol on February 7, 2018, in Washington DC.
After hours of discussions with GOP leader Mitch McConnell, Chuck Schumer, Senate Majority Leader, announced Thursday morning that the lawmakers had reached a compromise on a short-term debt limit increase.
Schumer, D.N.Y. said, "I have some positive news," from the Senate floor. "We have reached an agreement to extend the debt limit through December early, and it is our hope that this can be done as soon today."
According to sources familiar with the agreement, the debt limit will be increased by $480 billion. This amount, the Treasury Department estimates, will allow it pay bills up to Dec. 3. Under the agreement, the national debt would be allowed to increase to approximately $28.4 trillion.
Investors were relieved to see that the U.S. would not default. Stocks rose following the announcement. As of 11:25 AM, the Dow Jones Industrial Average had risen 486 points. ET, while S&P 500 rose 1.3%
This announcement by the Senate's top Democrat was made less than a day following the offer of a temporary solution to avert a government default and subsequent economic downturn by Minority Leader McConnell (R-Ky.). The Senate will vote on the Schumer/McConnell proposal late Thursday.
Republicans and Democrats were at odds for weeks over whether to raise or suspend the U.S. debt limit before Oct. 18, when the Treasury Department estimates that the country will have exhausted its emergency measures to pay its bills.
The United States has never defaulted upon its debt. Most economists believe that this would cause a recession and financial market swings.
The frustration of the Biden administration's reckless spending actions had caused Republicans to threaten to filibuster any debt ceiling legislation that was brought before the Senate in normal procedures.
Instead, the GOP pressed Democrats to adopt a budget reconciliation solution to save Republicans from voting for an increase in the nation's borrowing limit.
McConnell made this point very clear when he presented his offer Wednesday.
He wrote that Democrats would be allowed to continue using normal procedures to pass an emergency loan limit extension at a fixed dollar amount. This will cover current spending levels through December. "This will put an end to Democrats' excuses regarding the time crunch that they created, and give the united Democratic government more time to pass standalone debt limitation legislation through reconciliation."
