A few days before the deadline, US President Joe Biden and Republican leader Kevin McCarthy on Saturday agreed on an “in principle” agreement to avoid a US default, which still has to be confirmed by Congress.
• Also read: American default: Hopes for a political settlement are growing
The Republican-majority House of Representatives will vote on Wednesday, his boss said. Next is the Senate with a Democratic majority.
In a short speech, Kevin McCarthy assessed that the budget compromise, about which he gave no details, was “completely worthy of the American people”.
The Conservative leader said he was merely applauding the “historic cuts” in public spending that the agreement envisages, which is the Republicans’ main demand.
“This agreement is a compromise, meaning not everyone gets everything they want,” Joe Biden responded, assuring that the text “reduces spending while protecting essential public programs.”
The Democratic President called the agreement with the Conservatives “good news because it avoids a catastrophic (payment) default”.
2 years
Kevin McCarthy has indicated he will meet with Joe Biden again on Sunday and release the text later that day, the result of difficult negotiations.
According to several American media, the agreement reached between the executive branch and the opposition increases the US national debt ceiling by two years, i.e. until after the 2024 presidential election.
Without raising this limit, the first world power risked defaulting on June 5 and not meeting its financial obligations: salaries, pensions or reimbursements to its creditors.
Like almost all major economies, the United States lives on credit.
But unlike other developed countries, America regularly encounters a legal constraint: the debt ceiling, the maximum amount of US debt that Congress must officially raise.
The Republicans, who have held the majority in the House of Representatives since January, have turned this routine legislative process into a political pressure tool.
They refused to write a so-called “blank check” to the Democratic president and made any increase in that ceiling, currently $31.4 trillion, contingent on budget cuts.
Re-election candidate Joe Biden has long refused to come to the negotiating table, accusing the opposition of “holding the US economy hostage” by demanding such cuts.
“Under Surveillance”
After several meetings between the two men in the White House, the presidential and Republican “speaker” teams finally began endless negotiation sessions – all with plenty of commentary from across Washington.
Saturday night’s agreement in principle gives some breathing space to financial markets that have never really panicked, but shows that this paralysis is starting to grow impatient.
In fact, it is very common for this type of file to be compromised at the last minute.
The rating agency Fitch on Thursday put the US AAA rating “under surveillance” and said that failure to reach an agreement would represent “a negative sign for governance”.
The world economy, which is already characterized by “high uncertainty”, “could have done without” these tense negotiations, criticized the director of the International Monetary Fund, Kristalina Georgieva.
Still, that compromise must now be ratified by the Senate, which is narrowly controlled by Democrats, and the House of Representatives, over which Conservatives hold a fragile majority.
Some progressives within the Democratic Party, as well as elected officials in the Republican Party, have threatened not to ratify, or delay as long as possible, a text that would make too many concessions for the opposing camp.
A Republican-elect to the House of Representatives, Bob Good, estimated Saturday that given what he knew about the compromise, “no elected representative claiming to be conservative could justify a positive vote.”