A few days before the deadline, US President Joe Biden and Republican leader Kevin McCarthy reached an “agreement in principle” on Saturday to avoid default by the US, which still needs to be ratified by Congress.
The Speaker of the House, who has a Republican majority, said the House will vote on Wednesday. Then the Senate will come with a democratic majority.
Kevin McCarthy estimated in a short speech that the budget settlement reached, the details of which he did not provide, was “entirely worthy of the American people.”
The conservative leader only welcomed the “historic cuts” in public spending that the pact, he said, had been the main demand of the Republicans.
“This agreement is a compromise, which means that not everyone gets everything they want,” Joe Biden responded, for his part, emphasizing that the text “reduces expenses while protecting essential public programs.”
The Democratic president called the agreement with the conservatives “good news, as it averts what would have been a catastrophic default.”
Kevin McCarthy indicated that he will meet again on Sunday with Joe Biden and will publish the text on the same day as a result of difficult negotiations.
According to many American media outlets, the agreement reached between the executive branch and the opposition raises for two years, even after the 2024 presidential elections, the ceiling of the public debt of the United States.
Without raising this limit, the first world power risked default on June 5, unable to meet its financial obligations: salaries, pensions or payments to its creditors.
Like almost all major economies, the United States lives on credit.
But unlike other developed countries, America regularly faces legal restrictions: the debt ceiling, the maximum indebtedness of the United States, which must be formally raised by Congress.
Through this routine legislative procedure, Republicans, with a majority in the House of Representatives since January, have used it as a tool of political pressure.
They have refused to make a so-called “blank check” to the Democratic president, and have conditioned any increase in that ceiling, currently set at $31.4 trillion, on budget cuts.
His re-election candidate, Joe Biden, has long refused to come to the negotiating table, accusing the opposition of holding the US economy “hostage” by demanding such cuts.
After several meetings in the White House between the two men, the president’s team and the Republican “spokesperson” finally engaged in endless negotiating sessions—all of which were commented on at length by all of Washington.
The initial agreement reached on Saturday night gives a little air to the financial markets, which never panicked, but that paralysis is starting to wear off.
In fact, it is very common to reach last minute compromises on this type of file.
Ratings agency Fitch had put the US’ AAA rating “on watch” on Thursday, saying a failure to reach an agreement “would constitute a negative signal in terms of governance”.
The global economy, in the grip of “extreme uncertainty,” could have “doed without” these tense negotiations, as criticized by IMF Managing Director Kristalina Georgieva.
However, that compromise must now be ratified by the Senate, which Democrats control narrowly, and the House of Representatives, in which conservatives have a shaky majority.
Some progressives within the Democratic Party, as well as elected members of the Republican Party, threatened not to ratify or delay as much as possible a text that would make too many concessions to the opposing camp.
House Republican-elect Bob Goode estimated Saturday that given what he knows about the settlement, “no elected representative who claims to be from the conservative camp can justify an affirmative vote.”