US House Passes Bill To Avert Govt Shutdown Before Holidays But Debt Ceiling Battle Continues

The US House of Representatives passed a stopgap bill to keep its Government afloat and avoid a shutdown just before the Thanksgiving and Christmas holidays while keeping doors open for a larger discussion on funding in the new year.

The bill will now move to the Senate for approval. US President will sign the bill if and when it is passed by the Senate, a White House official told CNN. The official funding expiry date is on November 17.

The bill was approved by 209 Democratic and 127 Republican votes, while 93 Republicans and two Democrats voted against it.

"Making sure that government stays in operation is a matter of conscience for all of us. We owe that to the American people," Johnson said on Tuesday at a news conference at the Capitol.

How Will The Bill Help The US Economy

The stopgap bill would increase funding until January 19, 2024 for services including military expenses, veterans' affairs, transportation, housing and the Energy Department. The remaining that is not covered by the first step - would be funded until February 2. However, this proposal does not include additional aid for Israel or Ukraine.

The intent is to provide lawmakers more time to negotiate and pass full-year spending bills. The newly elected House Speaker Mike Johnson has argued that his proposal can prevent Congress from passing a large spending bill in December. Historically this has played out many times when lawmakers have fought a deadline just before the long winter holidays.

The US Congress is facing its third fiscal battle this year so far. That is after months-long debate over the more-than-$31 trillion in debt, which brought the Government to the edge of default. To put that in context, US owes to the next four countries with the highest debt including China ($14 trillion), Japan ($10.2 trillion), France ($3.1 trillion) and Italy ($2.9 trillion).

The debt ceiling is the upper limit amount of money any Government can borrow. On January 19, the US hit its borrowing limit of $31.4 trillion. After that, the US Treasury has implemented an increasing number of measures to avert failing to pay back its debt and default.

If US defaults on its payments, it would most likely push the world's largest economy into a major recession and the cascading effect with shake the global economy and lead to a surge in unemployment.

The current scenario in the US is despite the Federal Reserve raising interest rates by 525 basis points since March 2022, the economy has shown surprising resilience while the labour market remains strong. While the central bank is expected to cut rates next year, big US economists predict that the economic slowdown will start a little later may be in the fourth quarter of 2024.

The debt ceiling debate continues and this could be a bigger challenge than previously thought as America will face election battle next year in November.

(With inputs from agencies)