Biden And McCarthy Strike Deal To Avert US Default - Congressional Approval Looms
With days to spare before a potential first-ever government default, President Joe Biden and McCarthy strike deal to avert US defaulton Sunday to raise the nation's debt ceiling. Their immediate task now is to garner enough support in Congress to pass the measure in the coming week and avoid a damaging federal default.
The leaders, representing the Democratic and Republican parties, respectively, engaged in late-day discussions as negotiators hurried to draft and post the bill text for review. The compromises made in the final agreement are unlikely to appease the hard-right or left flank.
Instead, Biden and McCarthy are focused on securing backing from the political center as Congress races against the June 5 deadline to avert a potentially catastrophic federal default.
The agreement between Biden and McCarthy was hailed as a major breakthrough in preventing a historic default. Biden expressed relief at the White House, stating that the deal "takes the threat of a catastrophic default off the table" and called on both parties in Congress to come together for swift passage. McCarthy, too, expressed confidence in the deal's passage.
While the final product includes spending cuts, lawmakers from both sides are scrutinizing the concessions made, potentially causing some discontent. Nevertheless, Biden and McCarthy remain optimistic about the plan's prospects.
The coming days will determine whether Washington can once again narrowly avoid a default or plunge the globaleconomy into a potential crisis.
The implications of a U.S. default are severe. Financial markets could freeze up, sparking an international financial crisis. Experts warn of millions of job losses, soaring borrowing and unemployment rates, and a stock-market crash that could wipe out trillions of dollars in household wealth. Additionally, the $24 trillion Treasury debt market would be severely impacted.
Amid the negotiations, retirees and other concerned individuals are making contingency plans for missed checks, as the world anxiously watches American leadership navigate this critical situation.
McCarthy and his negotiating team presented the deal as a victory for Republicans, even though it falls short of the sweeping spending cuts they initially sought. Top White House officials are briefing Democratic lawmakers and directly reaching out to shore up support.
One unexpected provision important to Senator Joe Manchin, a Democrat from West Virginia, involves congressional backing for the controversial Mountain Valley Pipeline, a natural gas project likely to raise questions. Negotiators also acceded to some Republican demands for increased work requirements for food stamp recipients, which Democrats initially considered a nonstarter.
McCarthy acknowledged that the agreement may not satisfy everyone but emphasized the need for compromise in a divided government. Privately, he conveyed to lawmakers that Democrats "got nothing."
Weeks of negotiations led to the breakthrough when Biden and McCarthy spoke by phone on Saturday evening and agreed in principle to the deal. The 99-page legislative text was subsequently made public on Sunday.
To secure congressional approval before the projected June 5 government default, support from both parties will be necessary. Lawmakers are expected to return from the Memorial Day weekend on Tuesday, and McCarthy has committed to abiding by the 72-hour rule for posting any bill before voting in the House, potentially as early as Wednesday.
The package includes a two-year budget deal that maintains flat spending for 2024 while increasing defense and veterans' budgets and capping increases at 1% for 2025. It also raises the debt limit for two years, effectively pushing the politically sensitive issue beyond the next presidential election.
Republican lawmakers were successful in pushing for tougher work requirements on government aid recipients. Under the agreement, able-bodied individuals between the ages of 49 and 54 receiving food stamp aid would need to meet work requirements, with exemptions in place for veterans and homeless individuals.
The deal also introduces changes to the National Environmental Policy Act, streamlining the process by designating a single lead agency for developing environmental reviews.
Certain Republican demands, such as reducing funds for hiring new Internal Revenue Service agents, were accepted, and around $30 billion in coronavirus relief funds were rescinded, with $5 billion retained for the development of the next generation of COVID-19 vaccines.
The deal suspends the debt limit until January 2025. It came together after Treasury Secretary Janet Yellen warned Congress that the United States could default on its debt obligations by June 5, a revised estimate from the previous deadline. Raising the debt limit, currently at $31 trillion, allows the government to borrow more to pay for expenses already incurred.
McCarthy holds a slim majority in the House, where conservative members on the right flank may oppose the deal as insufficient, aiming to achieve greater spending cuts. By compromising with Democrats, McCarthy risks facing opposition from within his own party, creating a potentially career-defining moment for the new speaker.
Speaker Kevin McCarthy on Fox News Sunday
McCarthy expressed optimism, stating on "Fox News Sunday" that he believes a majority of Republicans will vote in favor of the bill. He also anticipates significant Democratic support due to Biden's endorsement of the deal.
House Democratic leader Hakeem Jeffries of New York expects Democratic support as well, but declined to provide a specific number. When asked whether he could guarantee that there would be no default, he confidently responded, "Yes."
A group of moderate Democrats in the New Democratic Coalition, comprising around 100 members, expressed support for the deal, considering it a viable bipartisan solution to end the crisis. Their support could compensate for opposition from members on the right flank of the Republican party, who expressed their disapproval even before the bill's details were made public.
Biden and McCarthy reach a final deal to avoid US default and now must sell it to Congress
The agreement not only alleviates pressure on Biden but also addresses criticism from progressives who accused him of capitulating to Republican "hostage-taking."
Democratic Representative Pramila Jayapal of Washington state, who leads the Congressional Progressive Caucus, expressed reservations about caucus members' support for the agreement. The White House and Jeffries face the task of ensuring sufficient backing from their party members.