Biden Signs Bill Ending Debt Limit Showdown

The debt limit crisis is over. For now, at least. 

President Joe Biden signed a bill Saturday suspending the nation’s self-imposed borrowing limit until January 2025. The bill, a compromise between Democratic and Republican leaders, limits federal spending for two years and expands work requirements for certain federal benefits.

Despite the resolution, the debt limit drama may have a lasting impact on the country. The standoff over the last few months between Republicans, who wanted steep budget cuts, and Democrats, who wanted the ceiling to be lifted unconditionally, had unsettled markets and prompted a major credit rating agency, Fitch, to warn that it may downgrade the government’s credit rating. On Friday, Fitch said that still could happen.

“Reaching an agreement despite heated political partisanship while reducing fiscal deficits modestly over the next two years are positive considerations,” Fitch said in a statement. “However, Fitch believes that repeated political standoffs around the debt-limit and last-minute suspensions before the x-date (when the Treasury’s cash position and extraordinary measures are exhausted) lowers confidence in governance on fiscal and debt matters.”

Repeating a pattern from previous clashes over the nation’s debt ceiling over the years, the signing came at the last possible moment, just before the Treasury was set to run out of money to pay interest on the national debt, Social Security payments, and myriad other expenses.

The government exceeded its $31.4 trillion debt limit in January, leaving the Treasury department to continue paying bills through “extraordinary measures” such as delaying certain payments. Those measures were set to run out Monday, June 5, leaving the government unable to pay all its bills—potentially setting off a financial crisis and a recession.