Dhe White House and the Republican Party have reached an agreement in principle in the debt dispute. US President Joe Biden and opposition leader Kevin McCarthy have agreed to raise the debt ceiling to avoid a US default, McCarthy confirmed in Washington on Saturday. The Biden-controlled Senate and Republican-controlled House of Representatives have yet to approve the deal.
The compromise was reached after tough negotiations and another phone call between Biden and McCarthy on Saturday. McCarthy told reporters he would speak with Biden again on Sunday and oversee the final wording of the bill. The House of Representatives should vote on Wednesday, he announced. He did not provide any further information on the content of the basic agreement.
The negotiations took place under great time pressure. Without an agreement, the US would have faced default from June 5, with potentially devastating economic and financial consequences far beyond the country. Treasury Secretary Janet Yellen warned on Friday, citing “the latest data”, that Parliament must raise the debt ceiling by June 5 in order for the government to meet its commitments.
The dispute had dragged on for months. Senior officials from Biden’s team continued to negotiate during his trip to Japan for the G7 summit. Biden had previously emphasized that he had managed to prevent a default 78 times in US history. However, both Republicans and Democrats would have to be prepared to cut corners.
Possible resistance to the compromise
But even with an agreement between the White House and McCarthy, the debt crisis is not yet completely off the table: There could be resistance to the compromise in both parties, which is why majorities in both chambers of Congress are by no means certain.
The United States had already reached the statutory debt limit of just under $31.4 trillion (around €29 trillion) in January. Since then, the US government has been using so-called extraordinary measures to prevent insolvency, but the options for doing so are soon exhausted.
The US debt limit has been suspended or raised dozens of times by presidents of both parties over the past few decades – and with bipartisan majorities. This year, however, the Republicans are flexing their muscles with their new majority in the House of Representatives won in the midterm elections in the fall of 2022.