Just days before a possible US credit default, US Congress decided to increase the national debt ceiling.
President Joe Biden is anticipated to sign the bill into law in the coming days, raising the US borrowing ceiling by $2.5 trillion (£1.9 trillion).
Treasury officials had warned that if the rate was not hiked by mid-December, the economy would enter a recession.
The vote follows a bipartisan agreement reached last week to raise the ceiling through a one-time rule modification.
The accord, reached between Senate Democratic Majority Leader Chuck Schumer and Republican Minority Leader Mitch McConnell, saw 14 Republicans vote in favor of changing the rules alongside every Senate Democrat.
The agreement permits Democrats to increase the debt ceiling with a simple majority rather than the 60 votes required to defeat a Republican filibuster.
Democrats and Republicans have always voted together to increase or suspend the debt ceiling, but Republicans have stated that Democrats should be responsible for raising or suspending the debt ceiling on their own this year.
The Senate barely passed the bill by a vote of 50-49 on Tuesday. The measure was passed by the House by a vote of 221-209.
It will now be forwarded to Vice President Joe Biden for signing.
The bill also extends the suspension of the debt ceiling until 2023, after the midterm congressional elections on November 8, which could tip the balance of power in Washington.
The agreement raises the US borrowing ceiling from $28.9 trillion to $31.4 trillion, putting an end to a months-long standoff between the two parties despite both sides agreeing that a default would be disastrous for the US economy.
The greater ceiling is needed in part to pay off the $7.85 trillion in new debt created by Trump’s tax cuts and Covid spending.
“This is about paying down debt accrued by both parties,” Mr Schumer said before of the vote in an address on the Senate floor.
“The American people can take a deep breath and know that there will be no default,” he continued.
“If they rush through another irresponsible taxing and spending spree, this tremendous debt increase will only be the beginning,” Mr McConnell, whose party had blasted Democrats for their $1.9 trillion Build Back Better social spending proposal, warned Americans in his speech.
Each year, the United States spends more than it collects in taxes, necessitating the sale of bonds as a way of borrowing money.
A statute passed in 1939 mandates Congress to establish a limit on how much debt it may hold, prompting hundreds of votes to raise the cap since then.
