The House approved a debt-ceiling overhaul that could soon allow Senate Democrats to avoid a government default.
The legislation lets the Senate lift the limit by a simple majority instead of requiring 60 votes.
Still, the reform itself requires 60 Senate votes, and it's unclear if enough Republicans will back it.
Congress has one week to save the US from an unprecedented economic crisis. The House just took the first step to resolve it with an unorthodox solution.
The House voted 222 to 212 on Tuesday night to approve a reform for raising the debt ceiling. The bill will allow the Senate to lift the limit with a simple majority instead of the 60-vote threshold needed to break a filibuster. If approved in the Senate and signed into law by President Joe Biden, the reform will pave the way for Senate Democrats to raise the ceiling on their own.
One Republican, Rep. Adam Kinzinger, joined House Democrats in passing the plan in the nighttime vote. The overhaul's passage marks the first major step toward raising the ceiling, and the clock is ticking with only days to go before the US potentially breaches the debt limit.
The debt ceiling serves as the legal limit for how much the government can borrow to pay for its past spending. Treasury Secretary Janet Yellen said in mid-November that Congress has until December 15 to raise or suspend the limit before the government risks defaulting on its debt.
The overhaul was attached to legislation that prevents scheduled cuts to Medicare.
The reform now goes to the Senate, where 10 Republicans need to join Democrats to approve the change. Senate Minority Leader Mitch McConnell expressed confidence in the reform's passage, saying Tuesday the solution is "consistent with Republican views."
Some Senate Republicans disagree. Sen. Bill Hagerty of Tennessee fired back at the proposal on Tuesday, telling Insider that Democrats "don't need a single Republican." Passing the reform would kill the Senate filibuster and pave the way for Senate chaos, Sen. Mike Lee of Utah told NBC News.
"This is a terrible idea. Terrible," Lee said. "This is nuking the filibuster."
The stakes surrounding the debt-ceiling battle couldn't be higher. Moody's estimated in September that breaching the ceiling would spark a recession similar in scope to the 2008 financial crisis. The country would lose nearly 6 million jobs, erasing months of progress from the pandemic recovery. The unemployment rate would more than double to 9% amid the "cataclysmic" fallout, economists led by Mark Zandi said.
The hit to markets would hammer Americans' fortunes. Stocks would dive by one-third in the worst of the selloff and wipe out roughly $15 trillion in household wealth, Moody's said.
Defaulting would also freeze payments to federal workers, service-member wages, and Social Security benefits. The world would also lose confidence in the dollar. That would lead to sharply higher borrowing costs and a permanent scar in the US economy.
"I can't think of anything more harmful to the role of the dollar than failing to raise the debt ceiling," Yellen said in September.
The one-time reform to the debt limit was concocted after weeks of secret negotiations with Senate Majority Leader Chuck Schumer and McConnell. The pair strenuously tried to avoid a similar showdown that brought the US to the brink of default in September. McConnell offered a two-month extension to avoid default and said then that Republicans wouldn't again offer such support.
The Tuesday deal signals raising the debt ceiling has returned to being the bipartisan task it had been for decades.