Biden and US House Speaker Reach Agreement on Debt Ceiling
In a significant development, President Joe Biden and US House Speaker Kevin McCarthy of the Republican Party have finally reached a temporary agreement to raise the federal government's debt ceiling from its current limit of $31.4 trillion. This breakthrough ends the months-long deadlock. Biden expressed his optimism about the agreement, stating that it is good news for the American people.
"By preventing what could be a catastrophic default, which would lead to an economic recession, decimated retirement accounts, and the loss of millions of jobs," he said, as quoted by AFP. Biden and McCarthy reportedly held a telephone conversation on Saturday evening (May 27, 2023) to discuss the debt ceiling agreement. McCarthy acknowledged that there is still much work to be done regarding the agreement. "However, I believe this is a principled agreement that is beneficial to the American people," he said. The agreement reached by Biden and Kevin McCarthy aims to prevent a US debt default that could destabilize the economy. Earlier, on Friday (May 26, 2023), the US Department of the Treasury warned that if the debt ceiling is not raised by June 5, the US will fail to meet its debt obligations and other expenditure items.
The Republican Party, which controls the House of Representatives, demanded significant cuts in government spending and put forth other conditions. The conditions set by the House include new work requirements for beneficiaries of social safety net programs for low-income Americans. Additionally, Republican politicians called for the defunding of the Internal Revenue Service (IRS). As reported by Reuters, Republican Party politicians stated that they want to slow down the growth of the US debt, which currently equals the annual economic output of the country. Details of the final agreement are not yet available, but negotiators have agreed to cap non-defense discretionary spending at the same level for the current year and the next two years. In return, the debt ceiling will be raised for the same period, according to sources cited by Reuters.
Discretionary spending refers to government expenditures allocated based on priorities such as transportation, education, and foreign aid. Both sides must proceed cautiously to reach a compromise that can pass through the House, where Republicans hold a narrow majority of 222-213, and the Senate, which is controlled by the Democratic Party with a slim majority of 51-49 seats.