Deal ‘In Principle’ Made to Raise US Debt Ceiling Before Default
02:13 GMT 28.05.2023 (Updated: 02:18 GMT 28.05.2023)
© AFP 2023 / SAUL LOEB
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Economists have warned that a government default could send the US into a recession and have also said it would be a shock to the international markets as well.
Joe Biden and House Speaker Kevin McCarthy (R-CA) have reached a deal to raise the government’s debt ceiling limit ahead just days before the start of June when the US Treasury Department said the government was at risk of defaulting on its obligations.
McCarthy confirmed the news on Twitter, saying that he and Biden had come to an agreement that was “worthy of the American people.”
I just got off the phone with the president a bit ago. After he wasted time and refused to negotiate for months, we've come to an agreement in principle that is worthy of the American people.
— Kevin McCarthy (@SpeakerMcCarthy) May 28, 2023
I'll deliver a statement at 9:10pm ET. Watch here:https://t.co/vmn31INPH5
It has been reported the deal will limit non-defense-related spending to 2023 levels for two years and will increase the debt ceiling for a similar amount of time. The deal will prevent any more debt ceiling standoffs until after the 2024 Presidential election.
In delivered remarks, McCarthy said that there was still a lot of work to be done before the bill is ready to be presented to Congress for a vote. He said he expects the text of the bill to be completed and posted Sunday, with the House voting on it on Wednesday.
McCarthy did not take questions from the press after making his statement.
"I just got off the phone with the President. I talked to him twice today, after weeks of negotiations, we have come to an agreement in principle," McCarthy said. "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."
It is not known what cuts the bill specifically mandates, McCarthy called them “historic” in his speech. One issue Biden and McCarthy were known to be negotiating in recent days included increased work requirements for food stamp recipients.
The bill will need bipartisan support to reach Biden’s desk. The Republicans hold a nine-seat majority, out of 435 seats, in the House of Representatives. The Democrats hold a likewise slim one-seat majority in the 50-seat Senate.
Due to the Senate filibuster, at least nine Senate Republicans will have to support bringing the bill to a vote.
When the debt ceiling was hit earlier this year, the Treasury Department instituted “extraordinary measures” to pay the government’s obligations. It warned at the time that those measures would only last until sometime in the summer. As summer neared, the department started giving more specific deadlines, first stating June and then specifying June 5 specifically.
Biden refused to negotiate with McCarthy for more than a month, demanding that Republicans pass a debt ceiling increase without preconditions. The two started negotiating on May 16. With Congress divided, there will be ample opportunities for the bill to be delayed further but there will be pressure on both sides to get a bill passed before the government defaults.
"Earlier this evening, Speaker McCarthy and I reached a budget agreement in principle," Biden said in a statement. "Agreement represents a compromise, which means not everyone gets what they want."
