US President Joe Biden and House Speaker Kevin McCarthy reached a final agreement on Sunday to raise the country’s debt ceiling, now at $31 trillion, while also ensuring enough Republican and Democratic votes to pass the measure in the coming week.
Central to the agreement is a two-year budget deal that would essentially cap spending for 2024, while increasing it for defense and veterans, and holding increases at 1% for 2025.
The end result would be raising the debt limit for two years, essentially ‘kicking the can down the road’ past the date of the next presidential election.
Republicans managed to win concessions from the Democrats, including people ages 49 to 54 with food stamp aid, excluding veterans and homeless people, having to meet work requirements if they are able-bodied and without dependents.
As well, there would be a freeze on hiring new Internal Revenue Service (IRS) agents and rescinding some $30 billion for COVID-19 (coronavirus) relief, while keeping $5 billion for developing the next generation of COVID vaccines.
McCarthy told reporters on Sunday that the agreement “doesn’t get everything everybody wanted,” but that was to be expected in a divided government.
Treasury Secretary Janet Yellen has previously told Congress that the US could default on its debt obligations by June 5.
A default could cause financial markets to freeze up and create an international financial crisis, with analysts saying millions of jobs would disappear, borrowing and unemployment rates would surge, and a stock-market plunge could erase trillions of dollars in household wealth, CNBC reported.
Contact Sean at sean@proactiveinvestors.com