Sunday morning European time The news has arrivedaccording to which US President Joe Biden and Republican House Speaker Kevin McCarthy have reached an agreement in principle to suspend the federal government’s debt ceiling of $31.4 trillion.
This will avoid the technical bankruptcy of the United States.
However, as we wrote, economic disaster was very imminent. Treasury Secretary Janet Yellen on Wednesday repeated her warning that unless lawmakers raise the debt ceiling, the United States will not have enough money.
In addition, the international credit rating agency Fitch downgraded the US issuer’s long-term credit rating to “AAA” to a “negative” outlook due to the delay in talks on raising the national debt ceiling.
And this seriously threatens bankruptcy.
In addition to Saturday’s agreement between the US president and the Speaker of the House of Representatives, new restrictions will be imposed on federal spending – I wrote it New York times. If approved by Congress, the deal would end the partisan impasse and prevent a potentially devastating bankruptcy.
Details are leaking out
It’s also important to stress that the agreement not only resolves weeks-long high-speed controversy over debt and spending issues, but also introduces important changes to environmental licensing, work requirements for Social Security programs, and taxation through the tax office.
The basis of the agreement, which is currently only in principle, is the phone conversation between Biden and McCarthy. The agreement must still be translated into official legislative language before it is considered final. But details come slowly:
The first and most important thing is to raise the debt ceiling until 2025, after the next elections.
The government has already reached the $31.4 trillion debt ceiling set by law, but so far the Finance Ministry has tried to avoid going overboard with various accounting tricks. Janet L. Yellen said Friday that her administration will finish those measures by June 5th, at which point the government will no longer be able to meet its obligations.
According to the agreement just reached, raising the debt ceiling will be delayed for two years, so he will not have to deal with this matter again in the current session.
Republicans originally proposed one year. At the same time, both parties expect to win the 2024 election and be in a stronger political position when the next debt ceiling is reached.
According to details just leaked, Republicans have insisted that any increase in the debt ceiling be tied to spending cuts. According to an analysis by The New York Times, the restrictions would reduce overall federal spending by about $650 billion over a decade — a fraction of the cuts Republicans originally requested.
Policy programs for Social Security, Social Security, Medicare and Veterans Affairs will be protected, and the proposal will not include the tax increases for the wealthy and corporations that Biden called for in the original budget proposal. Moreover, some recipients of government support will face new demands in the workplace.
Finally, in the case of larger energy projects, a simplified review procedure will be provided, and licensing of large energy projects will be simplified. Furthermore, one lead agency will be tasked with developing a review document on a general schedule.
It has happened before and it will happen again
However it turns out, in the past two decades it happened countless times that the United States went bankrupt for a few days.
Thanks to the current agreement, the state is supposed to avoid state bankruptcy.
Kevin McCarthy wrote on Twitter about the outcome of the consultation “I recently had a phone consultation with the President. After months of wasting time and refusing to negotiate, we now have a deal in principle that the American people deserve.” Joe Biden called the current deal an important step forward.
(Cover photo: Joe Biden on May 25, 2023. Photo: Kevin Deitch/Getty Images)
