President Biden and House Speaker Kevin McCarthy announced a deal Saturday night to avoid a federal default.
The agreement now requires approval from both chambers of Congress. McCarthy said a vote could come Wednesday in the House, where at least two Republicans in the chamber’s majority—Ralph Norman of South Carolina and Ken Buck of Colorado—have so far expressed unhappiness with the deal.
And at least one Democrat, Rep. Ritchie Torres of New York, also criticized the deal for differing reasons.
“The agreement represents a compromise, which means not everyone gets what they want,” Biden said in a statement. “That’s the responsibility of governing.”
The deal, which raisies the debt ceiling beyond next year’s presidential election into 2025, reportedly allows both Biden and McCarthy to declare victory.
Biden can point out that the agreement gets the government out from under the debt ceiling—at least temporarily—while avoiding demands from Republicans for deep domestic spending cuts. McCarthy, meanwhile, gets a deal that curtails federal spending and enhances some work requirements for some federal aid programs, like food stamps.
“Republicans are poised to deliver big, consequential change in Washington,” McCarthy said on Twitter Saturday night. “Soon, we will vote for a responsible debt limit agreement that stops Democrats’ reckless spending, claws back unspent COVID funds, blocks Biden’s new tax schemes, & much, much more.”
However, overall funding is mostly held flat for domestic programs, despite McCarthy having pushed for substantial cuts.
On Friday, Treasury Secretary Janet Yellen revised her earlier deadline, now saying the government has until next Monday, June 5, before it completely runs out of money if the debt ceiling is not raised.
That’s after the Treasury undertook “extraordinary measures” for the past four months to prevent default when the U.S. reached its $31.4 trillion debt limit on January 19.
According to Yellen, not raising the debt ceiling and defaulting the government’s debt would spell economic “catastrophe” for the country.
“Household payments on mortgages, auto loans, and credit cards would rise, and American businesses would see credit markets deteriorate,” she said in April.
Wall Street analysts have further noted that a stock market plunge as a result of debt default could wipe out 6 million jobs and $15 trillion in wealth.
In 2011 the U.S. suffered a ratings downgrade by Standard & Poor’s when the country came close to defaulting amid the rise of the conservative tea party movement in the House.
A credit downgrade could mean higher interest rates, including those for fixed mortgages, and it could send the stock market plummeting. On the first business day after the S&P’s downgrading in 2011, the Dow fell 5.5%.
