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All the details of the debt ceiling deal reached by Biden and McCarthy

President Biden and House Republic speaker McCarthy have reached a tentative agreement to avoid a U.S. default. Here’s what we know.

President Biden and House Republic speaker McCarthy have reached a tentative agreement to avoid a U.S. default. Here’s what we know.

After negotiations lasting several months, United States President Joe Biden has agreed a tentative deal with his Republican opponents to raise his government’s $31.4 milion debt ceiling and avert a default. The Treasury had warned that the US would run out of money and be unable to meet its financial obligations by 5 June if no deal was reached.

Top congressional Republican Kevin McCarthy revealed that he intended to finish drawing up the deal on Sunday and that it would have to be passed through Congress on Wednesday.

Neither Biden nor McCarthy seemed particularly jubilant that a potential disaster had been avoided, for now, although both tried to focus on the positives when asked about the outcome of the lengthy negotiations.

What did President Biden say about the debt ceiling deal?

The President called the deal “an important step forward”, despite conceding that it “represents a compromise, which means not everyone gets what they want”. However, Biden was adamant that the agreement would “prevent what could have been a catastrophic default and would have led to an economic recession, retirement accounts devastated, and millions of jobs lost”.

What did Kevin McCarthy say about the debt ceiling deal?

McCarthy also spoke on the expected impact of the deal, in terms of its impact on the government and the general public: “It has historic reductions in spending, consequential reforms that will lift people out of poverty into the workforce, rein in government overreach - there are no new taxes, no new government programs”.

Debt ceiling deal: what we know

While further details of the tentative agreement have not been officially released, it has been reported by CNN that the deal will:

  • Raise the debt limit for two years
  • Keep non-defence government spending will be kept flat in 2024 and increase it by 1% in 2025
  • Ensure veterans’ medical card remain fully funded
  • Temporarily expand work requirements for certain adults receiving food stamps (until 2030)
  • Claw back unspent covid-19 relief funds
  • Cut Internal Service Revenue Funding
  • Restart student loan payments (no date specified)

Wednesday 31 May: the next key date

McCarthy also said that the deal was “worthy of the American people” but that “there was still a lot of work to do”. The most pressing work will be to ensure that deal is approved by a divided Congress on Wednesday. Given that the House has a narrow Republican majority (222-13) and the U.S. Senate a slender Democratic one (51-49), the deal will need bipartisan support before Preisdent Biden can sign it.

The effects of a U.S. default

Were the United States to default, economists have forecasted that the nation would likely go into recession, which would have a knock-on effect on the global economy and see price of commodities rise across the board, given that dollar is the reserve currency of the world