2023-05-28 04:09:00
The President of the United States, Joe Bidenand the Republican leader of Congress, Kevin McCarthyreached an interim agreement to increase the federal government’s $31.4 trillion debt ceilingending a months-long stalemate.
Biden and McCarthy were on a 90-minute phone call early Saturday night in order to discuss the deal.
“I just got off a call with the President. After he wasted time and refused to negotiate for months, we reached a preliminary agreement that is worthy of the American people,” McCarthy posted on Twitter.
The deal will raise the debt ceiling for two years while limiting spending over that period, and includes some work requirements on programs targeting the poorest.
“We still have more work to do tonight to finish writing the agreement,” the Republican told reporters. McCarthy said he hopes to finish writing the bill on Sunday, then speak with Biden and vote on the piece on Wednesday.
The raising of the debt ceiling will avoid a destabilizing default for the economy, as long as it is approved by Congress, which is divided, before the Treasury Department run out of money to cover all your obligations. The deadline for raising the debt ceiling is June 5.
Exact details of the final deal are not yet available, but negotiators have agreed to cap non-defense discretionary spending at 2023 levels for two years, in exchange for an increase in the debt ceiling for a similar period.
The two sides need to carefully craft the agreement, so that it can be approved by the House, which has a Republican majority (222 to 213), and the Senate, where there are more Democrats (51 to 49).
The long standoff spooked financial markets, forcing the United States to pay record interest rates on some bond sales. A default would demand a much higher value, economists say, likely pushing the country into recession and rising unemployment, shaking the world economy.
Biden has refused for months to negotiate with McCarthy about future spending cuts, demanding that lawmakers first pass a “clean” debt ceiling increase, free of other conditions, and
submit a budget proposal for 2024.
Bilateral negotiations between Biden and McCarthy did not begin in earnest until May 16.
Democrats accused Republicans of playing a dangerous game with the economy. Republicans say recent surges in government spending are fueling rising US debt.
The last time the country came this close to default was in 2011, when Washington also had a Democratic president and a Republican-led Senate and House.
Congress eventually avoided default, but the economy withstood heavy shocks, including the first downgrade of America’s prime credit rating, accompanied by a large stock sell-off.
McCarthy promised to give House members 72 hours to read the bill before taking it to the floor for a vote. That will test whether enough moderate members support the bill’s commitments to overcome opposition from far-right Republicans and progressive Democrats.
The bill will then need to pass through the Senate, where it will depend on at least nine Republican votes to succeed. In both Houses, there are several ways to delay approval.
The two sides struggled to find common ground on spending levels. Republicans pushed for an 8% cut in discretionary spending in the next fiscal year, followed by 1% annual increases for several years.
Biden has proposed keeping spending flat in fiscal 2024, which starts Oct. 1, and increasing it by 1% the following year. He also called for closing some tax loopholes, which Republicans rejected.
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