Biden, McCarthy reach tentative deal to raise US debt ceiling
Deal raises the two-year debt limit while capping some spending, but uncertainty remains over whether it can pass Congress.
US President Joe Biden and Speaker of the House of Representatives Kevin McCarthy have reached a tentative agreement to raise the federal government’s $3.4 trillion debt ceiling days before a deadline to avoid a potentially catastrophic default .
However, McCarthy described the deal on Saturday in terms that suggested it may not be absolute, and without any celebration — an indication of the acrimonious tenor of the negotiations and the difficult path it must take through Congress before the United States runs out of money. to have. money to pay his debts on June 5.
The Democratic president and the Republican speaker reached an agreement in principle after an hour and a half of telephone calls.
“I just got off the phone with the president a while ago. After wasting time and refusing to negotiate for months, we have reached an agreement in principle worthy of the American people,” McCarthy said in a Twitter post.
According to the Reuters news agency, the deal would raise the debt limit for two years while capping spending over that time and includes some additional work requirements for programs for the poor.
McCarthy later told reporters on Capitol Hill that “we have more work to do tonight to finish writing it.”
He said he expects to finalize the bill on Sunday, then speak with Biden and vote on the deal on Wednesday.
The deal will avoid an economically destabilizing bankruptcy, so long as the president and speaker manage to get it through the narrowly divided Congress before the Treasury Department runs out of money to meet all its obligations.
The two sides must carefully mix and match the thread to find a compromise that the House, with a Republican majority of 222-213, and the Senate, with a Democratic majority of 51-49, can pass.
Biden had refused for months to negotiate future cuts with McCarthy, demanding that lawmakers first approve a “clean” debt ceiling increase with no other conditions, and present a 2024 budget proposal to counter his proposal released in March.
Two-way negotiations between Biden and McCarthy began in earnest on May 16.
Republicans have been pushing for major cuts in spending and other conditions, including new job requirements for some low-income Americans benefit programs and the diversion of funds from the Internal Revenue Service.
They said they want to slow the growth of US debt, which is now about equal to the annual output of the country’s economy.
Meanwhile, Democrats accused Republicans of playing a dangerous game with the economy.
The protracted deadlock spooked financial markets, weighing on equities and forcing the US to pay record high interest rates on some bond sales. Bankruptcy would take a much heavier toll, economists say, likely sending the country into recession, shaking the global economy and leading to a spike in unemployment.
The last time the country came this close to bankruptcy was in 2011, when Washington also had a Democratic president and senate and a Republican-led house.
Congress eventually averted bankruptcy, but the economy suffered severe shocks, including the first-ever downgrade of the US’s top credit rating and a major sell-off in stocks.