Biden, McCarthy reach tentative agreement to raise US debt ceiling | Business and Business News

The deal raises the debt limit for two years while limiting some spending. However, it remains unclear whether it can be accepted by Congress.

US President Joe Biden and House Speaker Kevin McCarthy have reached a tentative deal to raise the federal government’s $3.4 trillion debt ceiling days before a deadline to avert a potentially catastrophic default.

However, McCarthy described the deal on Saturday in words that suggested it may not be an absolute deal and that there will be no celebrations – a reference to the bitter tenor of the negotiations and the difficult road to pass through Congress before the United States is running out of time money to pay off its debt on June 5th.

The Democratic President and Republican Speaker reached an agreement in principle after a 90-minute phone call.

“I just got off the phone with the President. After wasting time and refusing to negotiate for months, we have reached an agreement in principle worthy of the American people,” McCarthy said in a Twitter post.

According to the Reuters news agency, the agreement provides for raising the debt limit for two years while limiting spending for this period. In addition, it provides some additional work requirements for programs for the poor.

McCarthy later told reporters on Capitol Hill that “we have more work to do tonight to finish the writing.”

He said he expects to finish writing the bill on Sunday, then talk to Biden and vote on the deal on Wednesday.

The deal will prevent an economically destabilizing default as long as the President and Speaker manage to get it through tightly divided Congress before the Treasury Department runs out of money to meet all of its obligations.

The two sides must weigh carefully to find a compromise that can convince the House of Representatives with a Republican majority of 222 to 213 and the Senate with a Democratic majority of 51 to 49.

Biden had for months refused to negotiate future spending cuts with McCarthy, demanding that lawmakers first pass a “clean” unconditional debt ceiling hike and present a 2024 budget proposal to counter his proposal published in March.

Serious negotiations between Biden and McCarthy began on May 16.

Republicans have been pushing for sharp cuts in spending and other conditions, including new job requirements for some benefit programs for low-income Americans and cutting funds from the IRS, the US tax agency.

They said they want to slow the growth of US debt, which is now roughly equivalent to the country’s annual economic output.

Meanwhile, Democrats have accused Republicans of playing a dangerous game that poses a risk to the economy.

The long standoff alarmed financial markets, weighing on stocks and forcing the US to pay record interest rates on some bond sales. A default would take a far greater toll, economists said, as it would likely plunge the country into recession, shake the global economy and lead to a rise in unemployment.

The last time the country was this close to default was in 2011, when Washington also had a Democratic President and Senate and a Republican-led House of Representatives.

Congress eventually averted the default, but the economy suffered severe shocks, including the first downgrade of the US prime credit rating and a major stock sell-off.