May 30th, 2023 6:00am PDT
(PenniesToSave.com) – President Biden and House Speaker Kevin McCarthy have reached a preliminary agreement to raise the debt ceiling. This resolves a three-month-long deadlock, eliminating the risk of a US default.
If approved, the deal will raise the country’s borrowing limit for two years. This resolution will effectively remove the divisive issue of America’s creditworthiness from immediate discussions, ensuring it won’t be a concern until after the upcoming presidential election.
The agreement includes spending limits that are characterized as “historic” by McCarthy. These limits will be in effect for the same period.
This announcement comes as the US government is expected to run out of funds to meet all of its financial obligations. Treasury Secretary Janet Yellen has projected that this could happen on June 5.
The agreement’s final details were discussed and solidified through two phone conversations between Biden and McCarthy on Saturday. McCarthy conveyed his belief that, although there is still work ahead, this initial agreement represents a substantial stride for the American people.
President Biden acknowledged that the agreement is a compromise, recognizing that not everyone will get everything they want. However, he emphasized the importance of this advancement as it includes spending reductions while still protecting critical programs for workers and promoting overall economic growth.
Despite the progress made, Wall Street still faces significant challenges ahead. President Biden and House Speaker McCarthy must now navigate the difficult task of convincing skeptical lawmakers from both sides of the political spectrum to support and pass the agreement into law. Concerns and reservations have been raised by politicians on both ends of the ideological spectrum for several weeks.
McCarthy, when questioned by reporters on Saturday, provided minimal information and stated his plan to discuss with other members before divulging further details.
On Saturday, President Biden had discussions with Senate Majority Leader Chuck Schumer (D-NY) and House Minority Leader Hakeem Jeffries (D-NY). Their roles in rallying Democratic votes in the upcoming days will be crucial.
Maya MacGuineas, spokesperson for the Committee for a Responsible Federal Budget, emphasized the significance of the agreement in a statement on Saturday night. She noted that if approved, this would be the first major budget agreement to actively address deficit reduction in almost twelve years. Such approval would send a clear message that Washington is dedicated to making progress in confronting our growing national debt.
McCarthy also emphasized an important aspect covered in the agreement: the controversial topic of work requirements being tied to access to certain government programs.
This issue is of great sensitivity to both political parties and remained a point of disagreement until the end of negotiations. Liberal Democrats have strongly emphasized their stance, arguing that implementing additional requirements would have minimal impact on the deficit while unnecessarily burdening the most vulnerable segments of the American population.
On the other hand, conservative Republicans have been advocating for larger spending cuts in recent months than what was ultimately included in the final agreement. Therefore, it is unlikely that many of McCarthy’s more conservative members will support the bipartisan proposal in the upcoming days.
Some members of the conservative Freedom Caucus, including Representative Chip Roy (R-TX), have expressed their criticism of several provisions in the bill. Representative Roy specifically stated that he cannot support the agreement based on recent leaks.
While Speaker McCarthy acknowledged that certain portions of the bill still require drafting, he provided assurance that the complete bill will be made public tomorrow. This is in preparation for a potential vote in the House of Representatives, which is scheduled for Wednesday.
President Biden emphasized the positive impact of the agreement on the American people, as it effectively averted the potentially devastating consequences of a default. This outcome would have included an economic recession, substantial losses in retirement accounts, and the perilous risk of millions of job losses.