WASHINGTON – Senate Democrats announced Thursday they will move forward with a short-term extension of the debt limit, accepting an offer from their Republican counterparts to avoid the economic chaos that would come if the U.S. was unable to pay its bills.
Senate Majority Leader Chuck Schumer, D-N.Y., said Democrats and Republicans reached a deal on a short-term extension of the debt ceiling into December. The Treasury Department said if Congress didn't raise the nation's limit on borrowing soon, the U.S. would start defaulting on debts for the first time ever starting Oct. 18.
"We have reached agreement to extend the debt ceiling through early December and it's our hope that we can get this done as soon as today," Schumer said on the Senate floor.
More:5 recent times Congress voted to suspend or raise the debt ceiling
The plan would need to be voted on in both the House and Senate before it goes to President Joe Biden's desk.
The deal would merely postpone a long-term decision on the debt limit. Congress would need to act on another debt limit solution by December in order to avoid another risk of default.
If the U.S. defaults on its debt for the first time, the results could lead to a global recession, Treasury officials and experts say. A tanked market would hurt 401(k)s and other investments. For example, a debt ceiling standoff in 2013 cost the economy 1% in GDP.
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