From Reuters:
“Biden, McCarthy have tentative US debt ceiling deal”
U.S. President Joe Biden and top congressional Republican
Kevin McCarthy have reached a tentative deal to raise the federal government's
$31.4 trillion debt ceiling, ending a months-long stalemate. However, the deal
was described in terms that indicated it may not be absolute, and without any
celebration -- an indication of the bitter tenor of the negotiations, and the
difficult path it has to pass through Congress before the United States runs
out of money to pay its debts in early June. "I just got off the phone
with the president a bit ago. After he wasted time and refused to negotiate for
months, we've come to an agreement in principle that is worthy of the American
people," McCarthy tweeted. The deal would raise the debt limit for two
years while capping spending over that time, and includes some extra work
requirements for programs for the poor. Biden and McCarthy held a 90-minute
phone call earlier on Saturday evening to discuss the deal. "We still have
more work to do tonight to finish the writing of it," McCarthy told
reporters on Capitol Hill. McCarthy said he expects to finish writing the bill
Sunday, then speak to Biden and have a vote on the deal on Wednesday.
The deal will avert an economically destabilizing default, so
long as they succeed in passing it through the narrowly divided Congress before
the Treasury Department runs short of money to cover all its obligations, which
it warned Friday will occur if the debt ceiling is not raised by June 5. Republicans
who control the House of Representatives have pushed for steep cuts to spending
and other conditions, including new work requirements on some benefit programs
for low-income Americans and for funds to be stripped from the Internal Revenue
Service, the U.S. tax agency. They said they want to slow the growth of the
U.S. debt, which is now roughly equal to the annual output of the country's
economy.
Negotiators have agreed to cap non-defense discretionary
spending at 2023 levels for one year and increase it by 1% in 2025, sources
said. The two sides have to carefully thread the needle in finding a compromise
that can clear the House, with a 222-213 Republican majority, and Senate, with
a 51-49 Democratic majority. One high-ranking member of the hardline House
Freedom Caucus said they were in the process of gauging member sentiment, and
unsure what the vote numbers might be. The long standoff spooked financial
markets, weighing on stocks and forcing the United States to pay record-high
interest rates in some bond sales. A default would take a far heavier toll,
economists say, likely pushing the nation into recession, shaking the world
economy and leading to a spike in unemployment. Biden for months refused to
negotiate with McCarthy over future spending cuts, demanding that lawmakers
first pass a "clean" debt-ceiling increase free of other conditions,
and present a 2024 budget proposal to counter his issued in March. Two-way
negotiations between Biden and McCarthy began in earnest on May 16. Democrats
accused Republicans of playing a dangerous game of brinkmanship with the
economy. Republicans say recent increased government spending is fueling the
growth of the U.S. debt, which is now roughly equal to the annual output of the
economy.
The last time the nation got this close to default was in
2011, when Washington also had a Democratic president and Senate and a
Republican-led House. Congress eventually averted default, but the economy
endured heavy shocks, including the first-ever downgrade of the United States'
top-tier credit rating and a major stock sell-off. The work to raise the debt
ceiling is far from done. McCarthy has vowed to give House members 72 hours to
read the legislation before bringing it to the floor for a vote. That will test
whether enough moderate members support the compromises in the bill to overcome
opposition from both hard-right Republicans and progressive Democrats. Then it
will need to pass the Senate, where it will need at least nine Republican votes
to succeed. There are multiple opportunities in each chamber along the way to
slow down the process. The two sides had struggled to find common ground on
spending levels. Republicans had pushed for an 8% cut to discretionary spending
in the next fiscal year, followed by annual increases of 1% for several years. Biden
had proposed keeping spending flat in the 2024 fiscal year, which starts Oct.
1, and raising it 1% the year after that. He also had called for closing some
tax loopholes, which Republicans rejected.
^ Fingers crossed this goes from a deal in principle to law
before June 5th. ^
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