Biden and McCarthy Agree to Raise the US Debt Ceiling – President Biden and House Speaker Kevin McCarthy have reportedly come to a preliminary agreement aimed at increasing the debt ceiling, thus resolving a three-month-long deadlock that posed a risk of triggering a default by the United States. If the deal is implemented, it would raise the country’s borrowing capacity for a duration of two years, effectively removing concerns about America’s creditworthiness until after the upcoming presidential election.
Additionally, the agreement would establish spending limits that McCarthy described as “historic” and are anticipated to remain in effect for the same time frame. The declaration arrives merely a few days ahead of the projected exhaustion of funds by the US government to fulfill its financial obligations. Treasury Secretary Janet Yellen has cautioned that this scenario could occur as early as June 5th.
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Biden and McCarthy ironed out the final details during two phone calls Saturday. “We still have a lot of work to do but I believe this is an agreement in principle that is worthy of the American people,” said McCarthy late Saturday. Biden, in a statement, said the “agreement represents a compromise, which means not everyone gets what they want.” “It is an important step forward that reduces spending while protecting critical programs for working people and growing the economy for everyone,” he added.
However, Wall Street cannot afford to be complacent at this point. The leaders are faced with a challenging responsibility of persuading skeptical lawmakers from both political parties to support a multitude of contentious provisions. Significant concerns have been apparent from both liberal and conservative factions for several weeks, and now the leaders are focusing on the task of garnering support for the agreement within their respective camps in order to successfully pass it as legislation.
On Saturday, McCarthy provided limited information to journalists, stating his intention to consult with his fellow party members before sharing more details. Additionally, President Biden engaged in discussions on Saturday with Senator Chuck Schumer (D-NY), the Majority Leader in the Senate, and Representative Hakeem Jeffries (D-NY), the Minority Leader in the House. Both Schumer and Jeffries hold the responsibility of rallying Democratic support in the coming days.
In a statement Saturday night, Maya MacGuineas of the Committee for a Responsible Federal Budget noted that the deal, if it passes, “would be the first major deficit-reducing budget agreement in almost a dozen years and would signal Washington is serious about making progress in addressing our mounting national debt.” McCarthy also highlighted that the deal tackles the contentious issue of mandating work obligations in exchange for eligibility for specific government programs.
The issue has been a highly sensitive matter for both political parties and remained a major point of contention until the final moments. The liberal Democrats have placed significant emphasis on this issue, contending that any increase in requirements would have minimal impact on the deficit and instead inflict unnecessary cruelty on the most vulnerable Americans. On the contrary, conservative Republicans have been pushing for more substantial spending cuts in recent months than what was ultimately agreed upon in the final deal.
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Consequently, many of McCarthy’s staunch conservative members are unlikely to lend their support to the bipartisan proposal in the coming days. The conservative Freedom Caucus has consistently criticized the leaked provisions, with Representative Chip Roy (R-TX) stating that it does not align with his principles and he cannot endorse it. While many specifics of the bill are yet to be disclosed, Speaker McCarthy mentioned that some parts of the bill still need to be drafted.
However, he assured that the complete bill would be posted, with a potential vote in the House of Representatives scheduled for Wednesday. Biden said “this agreement is good news for the American people, because it prevents what could have been a catastrophic default and would have led to an economic recession, retirement accounts devastated, and millions of jobs lost.”
