Biden and Republicans reach agreement on debt ceiling, Congress now in charge. US President Joe Biden and Republican Speaker of the House of Representatives Kevin McCarthy have reached a tentative agreement on raising the US federal government’s debt ceiling.
The US is not yet completely out of the danger zone. Indeed, Congress has yet to vote on the deal.
Biden and McCarthy spoke for about an hour and a half last evening about the deal that would allow the government to borrow more to spend on, for example, education and infrastructure. Afterwards, McCarthy tweeted, “I just got off the phone with the president. After months of wasting time and refusing to negotiate, we have reached an agreement in principle worthy of the American people.”
The current deal involves the equivalent of €29 trillion. Without a deal, bills probably could not be paid and officials would not receive salaries.
By law, there is a cap on the amount the US government can borrow. If the government wants to further increase the national debt, the limit has to be raised once in a while. Congress must then agree to it.
If the members of Congress do not agree on raising the debt ceiling, the US is expected to be bankrupt from 5 June. This would be the first time in US history, and the consequences are therefore highly unpredictable.
A deal on the debt ceiling is also important for the rest of the world. If there is no deal, consumer confidence could fall, resulting in less spending. As a result, foreign companies would sell less stuff in the country. Stock markets would also feel the pinch.