President Joe Biden and top congressional Republican Kevin McCarthy have tentatively agreed to suspend the $31.4 trillion debt ceiling of the federal government, effectively putting an end to a lengthy stalemate. However, the announcement of the deal lacked any sense of celebration, reflecting the acrimonious tone of the negotiations and the challenging path it must traverse through Congress before the United States runs out of funds to meet its financial obligations in early June.
The tentative deal involves suspending the debt limit until January 2025. Additionally, it includes spending caps for the 2024 and 2025 budgets, reclaiming unused COVID funds, expediting the permitting process for select energy projects, and introducing additional work requirements for food aid programs benefiting impoverished Americans.
For the agreement to succeed, both Biden and McCarthy must navigate a delicate path to find a compromise that can secure approval in the House, where Republicans hold a 222-213 majority, and the Senate, where Democrats hold a 51-49 majority. This means bipartisan support is necessary before the president can sign it into law.
Negotiators have agreed to cap non-defense discretionary spending at 2023 levels for one year, with a 1% increase in 2025, according to a source familiar with the deal. McCarthy highlighted the historic reductions in spending, significant reforms aimed at lifting individuals out of poverty and into the workforce and reining in government overreach. He emphasized that there are no new taxes or government programs included.
The agreement aims to avert an economically disruptive default, as long as it can successfully pass through the closely divided Congress before the Treasury Department exhausts its funds to cover all obligations. The Treasury Department warned on Friday that if the debt ceiling issue was not resolved by June 5, a shortfall of funds would occur.
House Republicans, who control the House of Representatives, have advocated for substantial spending cuts and additional conditions. As early details of the deal emerged, they expressed strong criticism. Conservative House Freedom Caucus member Representative Bob Good tweeted his concern that the deal would increase the debt by $4 trillion, stating that he would not support such an increase. Representative Dan Bishop from North Carolina described the deal as an “utter capitulation in progress.”
President Biden initially refused to negotiate with McCarthy on future spending cuts, insisting that lawmakers first pass a “clean” debt-ceiling increase without additional conditions and present a 2024 budget proposal to counter his own budget issued in March.
Raising the debt ceiling is an ongoing process. McCarthy has pledged to allow House members 72 hours to review the legislation before bringing it to a vote. The bill’s success will depend on whether moderate members can garner sufficient support for the compromises within it, overcoming opposition from both staunch conservatives and progressive Democrats in order to secure a simple majority vote. The bill will then need to pass the Senate, where at least nine Republican votes will be required. Along the way, both chambers have various opportunities to potentially impede the process.
Source: Investing.com
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