Congress must approve
Published on May 28, 2023 at 07:23
Updated on May 28, 2023 at 07:31
Days before the deadline, US President Joe Biden and Republican Party leader Kevin McCarthy reached an “agreement in principle” on Saturday that would avert a default by the US on payments, although it still needs to be verified by Congress.
The Republican-majority House of Representatives will vote on Wednesday, its boss said. Next comes the Senate with a Democratic majority.
Kevin McCarthy said in a short speech that the budget compromise found, which he did not elaborate on, was “absolutely deserved by the American people.”
The conservative leader welcomed the “historic reductions” in public spending that the deal would deliver, which he said had been a key demand of Republicans.
“This deal is a compromise, which means not everyone can get everything they want,” Joe Biden responded for his part, promising that the text “cuts costs while protecting essential public programs.”
The Democratic president said the deal with conservatives was “good news because it avoids a catastrophic (payment) default.”
– for two years –
Kevin McCarthy has indicated that he will meet with Joe Biden again on Sunday and release a speech the same day as a result of difficult negotiations.
According to several US media outlets, the agreement reached between the executive and the opposition raises the US public debt ceiling for two years, so after the 2024 presidential election.
Without raising this limit, the First World Power defaulted on June 5, leaving it unable to meet its financial obligations: pay salaries, pensions or repay creditors.
Like almost all major economies, the United States lives in debt.
But unlike other developed nations, the United States continues to run up against a legal hurdle: the debt ceiling, the maximum amount of U.S. debt that must be formally raised by Congress.
From this routine legislative practice, Republicans, with a majority in the House of Representatives since January, have developed an instrument of political pressure.
Refusing a so-called “blank check” from the Democratic president, they stipulated that the ceiling, currently set at $31.4 trillion, be raised to budget cuts.
His 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 observation” –
After several meetings at the White House between the two, the president and the Republican “speaker’s” teams descended into endless negotiating sessions — all with plenty of commentary across Washington.
In principle the agreement found on Saturday evening gives a little air to the financial markets, which are not really panicking, but this freeze is starting to get impatient.
Last-minute compromises are actually quite common with these types of files.
Ratings agency Fitch put the US’s AAA rating “under watch” on Thursday, saying failure to reach an agreement would be “a negative sign in terms of governance”.
The global economy, already in the grip of “high uncertainty”, could “do without” these tense talks, and the director of the International Monetary Fund, Kristalina Georgieva, had criticized.
However, the compromise must now be vetted by the Senate, narrowly controlled by Democrats, and the House of Representatives, where conservatives hold a weak majority.
Some progressives in the Democratic Party and elected members of the Republican Party have threatened not to approve or delay as long as possible a speech that would make too many concessions to the opposing camp.
Bob Good, a Republican elected to the House of Representatives, assessed that, given what he knew of the compromise, “no representative elected from the conservative camp could justify a positive vote.”