US Debt Standoff Resolved as Democrats and Republicans Agree to Raise Debt Ceiling
Agreement Reached in US Debt Standoff After months of negotiations, the White House and the Republican Party have reached a tentative agreement to raise the US debt ceiling and avoid default. President Joe Biden and Republican Leader Kevin McCarthy have come to a compromise that now requires approval from both the Democrat-controlled Senate and the Republican-controlled House of Representatives.
Details of the Compromise Although specific details of the deal have not been released, McCarthy has mentioned that there will be no new taxes or government programs in the text. The compromise includes “historic spending cuts,” according to McCarthy, which Democrats agreed to in exchange for a debt ceiling increase. The negotiations centered around Republican demands to cut spending on social programs, with Democrats instead opting to close tax loopholes for the wealthy.
Potential Hurdles to Approval Approval of the agreement by both chambers of Congress is not guaranteed, as both parties may face resistance from their members. However, the deal is urgently needed to prevent the US from defaulting on its debt, which could have devastating economic and financial consequences.
Time is Running Out Without a deal in place, the United States would have faced default as early as June 5th. US Treasury Secretary Janet Yellen has warned that this outcome would be catastrophic for the global economy.
History of Debt Ceiling Raises The US debt ceiling has been raised or suspended dozens of times in the past, with bipartisan majorities typically approving the measures. This year, however, the Republican party has used its new majority in the House gained during the 2022 mid-term elections to push for spending cuts, complicating the passage of the debt ceiling increase.