(Bloomberg) -- Senators scrambled Thursday to agree on a plan for swift consideration of the debt-limit deal forged by President Joe Biden and House Speaker Kevin McCarthy ahead of a June 5 deadline to avert a destabilizing default.
The two parties met separately for lunch behind closed doors to sort through which amendments could be considered, and how best to pacify hawkish Republicans demanding assurances of an emergency defense bill later this year.
“Things are moving in the right direction,” Republican Senator Susan Collins, a moderate from Maine, said mid-afternoon.
At least two Republicans — Mike Lee of Utah and Lindsey Graham of South Carolina — have threatened to tie up the Senate floor if their demands aren’t met, a move that could push a vote past the default deadline.
Collins and other senators huddled on the floor and in hallways throughout the morning. Later, independent Senator Kyrsten Sinema, known for deal-making, ducked her head into the Republican lunch to thunderous applause.
Lawmakers from both parties in the House joined to approve the bill 314-117 Wednesday evening. The legislation would impose restraints on government spending through the 2024 election and suspend the legal debt limit until January 2025.
“The Senate will stay in session until we send a bill avoiding default to President Biden’s desk,” Majority Leader Chuck Schumer, a New York Democrat, said. “Any change to this bill that forces us to send us to send it back to the House would be unacceptable. It would almost guarantee default.”
Investors have largely judged the risk of a US default as resolved and are shifting attention to other uncertainties, such as Federal Reserve policy. The S&P 500 was higher midday Thursday in New York, while Treasury yields were down.
Approval by the Senate is seen as virtually certain, and the only question is timing. The No. 2 Senate Republican, John Thune, told reporters Thursday that the leadership was trying to get the number of amendments “down to a manageable level.”
“I would say it’s trending more towards tomorrow” for a vote, Thune said shortly before noon as negotiations continued.
Lee, one of the senators demanding a vote on amendments to the debt deal, criticized the agreement in an interview on Fox Thursday morning and questioned the Treasury’s estimate of a June 5 default deadline — but he didn’t say he would seek to slow the debate.
“I want to make one thing very, very clear: We are not going to default,” said Lee, who huddled on the House floor with conservative opponents of the bill during the vote in that chamber late Wednesday.
Meantime, the Treasury has been maneuvering to maximize its ability to keep making payments while avoiding a breach of its borrowing authority. It’s selling unusually short-dated bills to raise funds, while considering putting off by a few days a regular three-and six-month bill auction-size announcement.
On Wednesday, the Treasury also unveiled plans for a complex debt-swap maneuver with the Federal Financing Bank to gain an extra $1.9 billion of headroom under the debt ceiling.
Graham on Thursday threatened to use procedural delays to tie the bill up until Tuesday — one day after the default deadline — if he isn’t assured that funds would continue flowing to Ukraine.
Under the deal, defense spending would grow by 3.3% next year. But funds to equip Ukraine in its war against Russia typically have been handled by supplemental spending, which would not be included in the caps.
Facing a revolt from some hawkish Republicans, Minority Leader Mitch McConnell indicated more Pentagon dollars could come later on, and said national security funding remains an “urgent” priority.
Read More: Defense Hawks Eye Emergency Funds to Exceed Caps in Debt Deal
The debt-limit agreement won the backing of two-thirds of House Republicans, in a rare moment of bipartisan accord in a bitterly divided Washington.
“It will pass. The votes are there as demonstrated in the House, it’s a parallel situation in the Senate,” Oregon Democratic Senator Jeff Merkley, who intends to vote against the measure, said on CNN Thursday morning.
--With assistance from Tyler Kendall, Molly Smith and Laura Litvan.
©2023 Bloomberg L.P.
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