An agreement was reached on America’s debt ceiling to banish the specter of a traumatic default and curb public spending. President Joe Biden and the Republican opposition, which controls the House of Representatives, agreed late Saturday night on a compromise of principle that suspends the debt ceiling for two years.
A negotiation marathon
The agreement came about at the end of a tense marathon of negotiations. US Treasury Secretary Janet Yellen warned in her latest estimate that a historic bankruptcy was imminent since June 5 as no action on the so-called debt ceiling would be taken and financial markets had shown signs of growing nervousness as the deadline drew near. In 2011, only last-minute default risk had cost US bond ratings downgrade by S&P and a 20% share price decline.
Biden: important step
In a White House statement, Biden hailed the deal with Republican House Speaker Kevin McCarthy as a “major step that cuts spending while protecting vital worker assistance programs” and boosting economic growth. Biden insisted the deal would not reverse his and Democrats’ top priorities. The President called on the House and Senate to approve the pact immediately.
McCarthy: historic spending cuts
McCarthy, for his part, reiterated in a news conference from Capitol Hill that the agreement includes “historic spending cuts and follow-on reforms that lift people out of poverty and reduce excessive government intervention.” He stressed that no new taxes are planned to boost tax revenues, which Conservatives anathema.
The parliamentary voting test
The hypothesis of both Biden and McCarthy, as indicated by their statements, is that the plan can be viewed as a reasonable outcome by most proponents of both parties, despite opposing intentions. This would limit desertions and together Republicans and Democrats could mobilize enough votes for passage.