US President Joe Biden has reached an agreement with Kevin McCarthy, the speaker of the House of Representatives, that will avert an impending default in early June and bring relief to the economy and global financial markets.
Biden and McCarthy reached an agreement in principle on Saturday after days of intense, round-the-clock negotiations between the White House and Capitol Hill seeking to break the deal. financial deadlock hold Washington tight.
The deal will lift the $13.4 trillion U.S. borrowing limit for two years, until after the next presidential election in late 2024, and will include government spending limits for the same period. period.
But the compromise law still needs to be passed by both houses of Congress next week and is likely to face resistance from some lawmakers in both Republicans and Democrats.
Until then, there will remain uncertainty about the likelihood of a default by the world’s largest economy that could rock markets, raise borrowing costs and shock labor markets around the world. Janet Yellen, US Treasury Secretary, has warned that the US is at risk of default as early as June 5.
In a statement Saturday night, Biden urged both houses of Congress to pass the deal “immediately.”
“Agreement represents compromise, which means not everyone gets what they want. That is the responsibility of management,” the president said.
“And this deal is good news for the American people, because it averts what could be a catastrophic default and would lead to a recession, devastated retirement accounts and millions of jobs. lost.”
The deal was signed after Biden and McCarthy spoke by phone Saturday night. Biden is at the presidential retreat of Camp David in Maryland, while McCarthy remains in Washington to oversee the negotiations. Throughout the day, the speaker discussed with his key negotiators as well as those responsible for counting votes and arranging votes as the bill reaches the House of Commons.
“I believe this is a deal in principle worthy of the American people,” McCarthy told reporters at the Capitol before informing lawmakers of the deal. He added that he expected the text of the law to be posted on Sunday and put up for a vote on Wednesday.
“It has historic spending cuts, consequential reforms that will lift people out of poverty into the workforce [and] refrain from going beyond the reach of the government,” he added.
The biggest risk to passing the deal in Congress is a possible uprising from the right wing of the Republican party closest to former president Donald Trump. There were signs of unrest and anger.
Dan Bishop, a lawmaker from North Carolina, tweeted on Saturday that it would be “war” if McCarthy introduced a debt limit increase to protect Biden in the 2024 presidential race. McCarthy would need backing of some Democrats to win a majority on the bill, but it is unclear how many would support it.
The debt ceiling debate will not only have economic and financial implications. It could also resonate in the race for the White House. Biden kicked off his re-election campaign, while Trump and Ron DeSantisFlorida governor, are the leading contenders for the Republican nomination.
A person familiar with the negotiations said the deal would keep non-defense spending roughly flat in fiscal 2024, while increasing it by 1% in 2025, with no cap after that. Republicans initially pushed for deeper spending cuts for a decade.
One of the biggest sticking points in the negotiations was a Republican request to strengthen employment requirements for social safety net programs, especially food aid for those with disabilities. low income. One version of that measure is part of the agreement, setting a time limit for recipients to age 54.
But Biden has secured a stipend for the homeless and veterans, while ensuring that the new job requirements are not permanent. The tentative agreement also includes a provision designed to speed up environmental assessments.
The deal was welcomed by the American Chamber of Commerce, the largest US business lobby group, urging members of Congress to pass it into law.
“Americans deserve a government that works. With news of a deal to avert a debt ceiling crisis, the President and congressional leaders have shown they can work together on a bipartisan basis and act in the best interest of the land. our country,” said Suzanne Clark, executive director of the department.
