Washington:
Top Republican leader Kevin McCarthy and President Joe Biden announced an agreement on Saturday to raise the debt ceiling, leaving the United States just days away from default.
Congress will vote on Wednesday on a deal to extend government borrowing authority at a time when Treasury forecasts the government will no longer be able to pay its bills, throwing the world’s largest economy into turmoil.
“After weeks of negotiations, we have reached an agreement in principle,” said McCarthy, the speaker of the Republican-held House of Representatives.
McCarthy, who spoke with Biden on Saturday to close the deal, said he would consult again with the president on Sunday and oversee the final drafting of the bill. The House “will then vote on it on Wednesday.”
Biden said in his own statement that the deal was “good news for the American people, because it prevents a catastrophic lapse that would lead to an economic downturn, devastated retirement accounts, and the loss of millions of jobs.”
Despite the success, McCarthy cautioned that “there is still a lot of work to be done” to drum up his support for Congress.
‘Settlement’
Raising the debt ceiling – a legal maneuver that goes on for most years without drama – allows the government to borrow money and remain solvent.
This year, Republicans demanded drastic cuts in spending – largely in social spending for the poor – in exchange for raising the debt ceiling, saying it would be a bitter medicine to overcome the nation’s massive $31 trillion debt. The time has come.
Biden argued that he would not negotiate on spending issues as a condition for raising the debt ceiling, accusing Republicans of holding the economy hostage.
Both sides have now come down to some extent.
According to US media reports, the framework of the deal includes freeing up the debt ceiling for two years, meaning there would be no need for talks in 2024, when the nation is in full swing for a presidential election.
According to reports, Republicans did not want a major cut in spending, but what would effectively be a budget freeze. There would also be strict rules on receiving unemployment benefits and other federal aid.
Biden said “the settlement represents a compromise, which means everybody doesn’t get what they want. It’s the responsibility of governance.”
time limit
Treasury Secretary Janet Yellen initially warned of a possible default around June 1 if Congress failed to raise the borrowing limit, but gave lawmakers some breathing room on Friday when she updated the June 5 deadline. Did.
Even so, the legislation would still have to be cleared by Congress more quickly than the normal timetable for the most controversial bills.
Under House rules, after a bill is introduced, lawmakers have 72 hours before voting on it. And if it passes the House, it must go through the Senate, where Democrats hold the majority.
McCarthy is hoping to bring with him a narrow House majority of 222 Republicans, but the deal is likely to face opposition from 35 far-right lawmakers, who have called him “holding the line” against settling on far more sweeping spending cuts. asked for. This means that a large number of Democrats have to be persuaded to vote with a small number of Republicans – something that rarely happens on large bills.
Democrats may face a rebellion of their own on the left of the party, which opposes any spending curbs.
Congress was adjourned for an extended holiday weekend but lawmakers will be called back to vote.
If a default occurs, the government won’t be able to repay the debt until mid-June, but $25 billion in Social Security checks and federal wages could be withheld in the meantime.
The battle has been closely monitored by the major rating agencies, with both Morningstar and Fitch warning that they could opt for a downgrade even if the crisis is averted.
When Barack Obama’s administration narrowly downgraded a default 12 years ago, it cost taxpayers more than $1 billion in higher interest costs to downgrade the rating.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)