Biden and Republicans Reach Historic Deal to Raise US Debt Ceiling

 Biden and Republicans Reach Historic Deal to Raise US Debt Ceiling

After weeks of intense negotiations, President Joe Biden and House Speaker Kevin McCarthy have struck a groundbreaking deal to raise the US debt ceiling. This historic agreement, described as "good news for the American people," brings relief while averting the looming threat of a government default that could have triggered a global economic catastrophe.

President Biden and House Speaker McCarthy Announce In-Principle Agreement

The in-principle agreement, reached during a crucial phone call between Biden and McCarthy, marks the end of a months-long stalemate on a deal to raise the debt ceiling in the US for two years and limit budget spending. Now, the focus shifts to gaining the necessary support from the Republican-controlled House and the Democrat-dominated Senate before the critical deadline of June 5.

Treasury Secretary Janet Yellen recently warned that failure to raise the debt ceiling could result in the US government being unable to meet its financial obligations. The urgency of the situation spurred both sides to action, culminating in the breakthrough agreement.

House Speaker McCarthy expressed cautious optimism, stating, "We have agreed in principle. We still have a lot of work to do, but I believe this is an agreement worthy of the American people." Meanwhile, President Biden confirmed the deal on Twitter, acknowledging that it may not please everyone, but stressing its importance in preventing a catastrophic default and the subsequent economic recession.

Bipartisan Compromise Reached, Congress Urged to Act Swiftly

Joe Biden has urged both chambers of Congress to “pass the agreement right away.” Negotiating teams are expected to present the finalized text of the legislation on Sunday and McCarthy said that he will likely speak with the President again in the afternoon.

The proposed agreement includes a provision to cap spending and postpone further revisions to the debt ceiling until after the 2024 presidential election. If approved by Congress, the USD 31.4 trillion debt limit will be raised through January 2025, ensuring stability and avoiding future clashes between the Democrats and Republicans.

In a bid to address concerns over spending, the agreement sets caps for the 2024 and 2025 budgets as reported by Reuters. CNN sources following the developments have mentioned that non-defence spending will remain at current levels for the next fiscal year, with a 1% increase projected for the following year.

The potential default and the looming threat of a recession have sent shockwaves throughout the global economy. Leading credit rating agency, Moody has warned of the near-term danger to the dollar's position, while China's Chengxin International Credit Rating Agency recently downgraded the credit rating of the United States.

However, the news of the bipartisan agreement has already shown positive effects on the cryptocurrency markets. Bitcoin and Ether, the two largest cryptocurrencies, experienced price surges of around 2% and nearly 1%, respectively, signalling increased investor confidence.

As Congress prepares to vote on the agreement, the nation and the world hold their breath. The decision carries significant implications for the US economy and global financial stability. The outcome will determine whether the United States can successfully avert a crisis that could have had far-reaching consequences.

What is your take on Congress supporting the agreement to raise the debt ceiling in time? Please post your comment.