Biden welcomed the settlement Saturday night, saying it would prevent a “catastrophic default.” Congress, with the Senate controlled by Biden’s Democrats and the House of Representatives controlled by Republicans, has yet to approve the dea
Biden: Debt settlement agreement prevents “catastrophic default”
The agreement is “a compromise, which means not everyone gets what they want,” Biden said. However, the deal prevents “a potential catastrophic default” that would have “lead to an economic recession, destroyed pension funds and the loss of millions of jobs,” he added. The deal “reduces spending while protecting essential public programs.”
The compromise was reached after tough negotiations and another phone call between Biden and McCarthy on Saturday. According to several US media, it provides for an increase in the debt ceiling for two years and thus beyond the presidential election of November 2024.
The House of Representatives is scheduled to vote on the bill on Wednesday
McCarthy told journalists he would speak with Biden again on Sunday, oversee the final wording of the bill and release the text that same day. The House of Representatives should vote on Wednesday, he announced.
“We have reached an agreement in principle worthy of the American people,” McCarthy tweeted. It includes “historic cuts” in public spending. This was one of the Republicans’ key demands in the debt dispute.
The negotiations took place under great time pressure. US Treasury Secretary Janet Yellen warned on Friday, citing “the latest data,” that Parliament must raise the debt ceiling by June 5 so the government can meet its debt obligations. But even with the agreement in principle between the White House and Republicans, the debt crisis is not yet completely off the table: There could be resistance to the compromise in both parties, which is why majorities in both chambers of Congress are by no means certain.
US debt limit has been suspended or raised several times
The United States had already reached the statutory debt limit of just under $31.4 trillion (around €29 trillion) in January. Since then, the US government has been using so-called extraordinary measures to prevent insolvency, but the options for doing so are soon exhausted.
The US debt limit has been suspended or raised dozens of times by presidents of both parties over the past few decades – and with bipartisan majorities. This year, however, the Republicans are flexing their muscles with their new majority in the House of Representatives won in the midterm elections in the fall of 2022.
Serious debt dispute – Biden accused the opposition of taking the US economy “hostage”.
The opposition Republicans only wanted to approve an increase in the debt ceiling in return for cuts in government spending worth billions. They wanted to take back key elements of Biden’s reform policy, including billions in subsidies for renewable energy and a waiver of certain student fee debt.
Biden rejected this and accused the opposition of taking the country’s economy with the threat of default as a “hostage” in order to push through their political agenda.