In a breakthrough after months of deadlock, U.S. President Joe Biden and top congressional Republican Kevin McCarthy have reached a tentative agreement to suspend the federal government's $31.4 trillion debt ceiling. The deal, announced without fanfare, reflects the arduous negotiations and the challenging path it must traverse through Congress before the United States faces a potential default in early June.
McCarthy tweeted about the agreement, stating, "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." Biden, in a statement, called the deal "an important step forward" and acknowledged that compromises had to be made in the spirit of governing.
Under the agreement, the debt limit would be suspended until January 2025. It also includes spending caps for the 2024 and 2025 budgets, the retrieval of unused COVID funds, expedited permitting for certain energy projects, and additional work requirements for food aid programs aimed at assisting low-income Americans.
The tentative agreement materialized through a series of discussions. Biden and McCarthy held a 90-minute phone call to discuss the deal, after which McCarthy briefed his members. Subsequently, the White House and McCarthy spoke again. McCarthy stated that the bill is still being finalized and is expected to be completed on Sunday, with a vote scheduled for Wednesday.
Passing the agreement will require careful navigation by both Biden and McCarthy to secure bipartisan support in the House, where Republicans hold a 222-213 majority, and in the Senate, where Democrats hold a slim 51-49 majority. Negotiators have agreed to cap non-defense discretionary spending at 2023 levels for one year, with a 1% increase in 2025, according to a source familiar with the deal.
The agreement is crucial in averting a potentially catastrophic default, provided it successfully passes the divided Congress before the Treasury Department's June 5 deadline for resolving the debt ceiling issue. Republicans, who control the House of Representatives, have pushed for significant spending cuts and other conditions. Early details of the deal were met with sharp criticism from some conservative Republicans who view it as a capitulation.
The standoff over the debt ceiling has had a destabilizing impact on financial markets, weighing on stocks and leading to record-high interest rates in bond sales. Economists warn that a default would have even more severe consequences, potentially triggering a recession, global economic turbulence, and a surge in unemployment.
Biden had initially refused to negotiate with McCarthy on future spending cuts, insisting on a "clean" debt-ceiling increase without additional conditions, and demanding a 2024 budget proposal to counter his own budget issued in March. Meaningful negotiations between Biden and McCarthy began on May 16.
The work to raise the debt ceiling is far from complete. McCarthy has pledged to give House members 72 hours to review the legislation before a vote is held. The bill's success will depend on garnering enough support from moderate members to overcome opposition from both staunch Republicans and progressive Democrats and secure a simple majority. It will then need to pass the Senate, where at least nine Republican votes will be necessary for its passage, with opportunities for potential delays throughout the process.
