White House and Republicans tentatively agree to raise debt ceiling by $2 trillion

White House and Republicans tentatively agree to raise debt ceiling by $2 trillion

After lengthy negotiations, the White House and Republicans in Congress reached an agreement to raise the national debt ceiling by $2 trillion. The agreement also provides for spending cuts of $50 billion in the current financial year and freezing them for the next year.

High on the package is a two-year budget agreement that would see spending remain flat in 2024 and increase by 1% by 2025 in exchange for a two-year increase in the debt limit. This will avoid another debt crisis and ensure government funding until the end of Joe Biden’s presidential term.

In a statement, President Biden described the agreement as a compromise that is good for the country “because it prevents what could be a catastrophic default that would lead to an economic recession, emptying pension accounts and losing millions of jobs.”

For his part, Speaker of the House Kevin McCarthy cited “historic spending cuts, incremental reforms that will lift people out of poverty and into the work force.”

“There are no new taxes, no new government programs,” he said.

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McCarthy added that he planned to finish writing the bill on Sunday so that it could be voted on in Congress on Wednesday.

The agreement must be approved by both houses of Congress and signed by the president. This is expected to happen before May 31, when the current debt limit expires. Both Senate party leaders expressed their support for the deal and called on their colleagues to vote in favor of it.

The current US debt limit is $31.4 trillion. This limit was reached on January 19, 2023, and since then, the US Treasury has been using various “exceptional measures” to keep it from exceeding it. However, these measures may be exhausted as early as June 2023, after which the US government will not be able to meet its financial obligations. Therefore, it is necessary to increase the public debt limit until May 31, 2023, when the current term expires.

The growth of the US national debt

The agreement to raise the debt ceiling reduces the risk of US default on its obligations in dollars, which will help strengthen the US currency and investor confidence. The global financial system is based on the notion that the US will never default on its dollar obligations because it prints as much as it needs. The US national debt is the main reserve asset in the world, almost 60% of savings stored in dollars (20% in euros, 5% in yen and pounds, 3% in yuan).


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