Default probably averted
Agreement in dispute over US debt limit
5/28/2023 3:02 am
According to media reports, the negotiators have achieved a breakthrough in the negotiations to raise the debt ceiling in the USA. A default in the world’s largest economy is therefore likely to have been averted. However, Congress still has to approve it.
According to media reports, the White House and the Republicans have reached an agreement in principle in the debt dispute. US President Joe Biden and opposition leader Kevin McCarthy agreed to raise the debt ceiling to avoid a US default, US media reported. The compromise was reached after tough negotiations and a phone call between Biden and McCarthy.
The negotiations took place under great time pressure. Without an agreement, the US would have faced default from June 5, with potentially devastating economic and financial consequences far beyond the country. Treasury Secretary Janet Yellen warned on Friday, citing “the latest data,” that Parliament must raise the debt ceiling by June 5 in order for the government to meet its commitments.
But even with an agreement between the White House and McCarthy, the crisis is not over. The Senate, controlled by Biden’s Democrats, and the House of Representatives, controlled by the Republicans, have yet to approve the deal. There could be resistance in both parties to a compromise that has been found, which is why majorities in both chambers of Congress are by no means certain.
Overnight deal review
The United States had already reached the statutory debt limit of just under $31.4 trillion (around €29 trillion) in January. Since then, the US government has been using so-called extraordinary measures to prevent insolvency, but the options for doing so are soon exhausted.
The US debt limit has been suspended or raised dozens of times by presidents of both parties over the past few decades – and with bipartisan majorities. This year, however, the Republicans are flexing their muscles with their new majority in the House of Representatives won in the midterm elections in the fall of 2022.
There were still “a little thing or two to work out,” but the sides are close enough to reach an agreement, an insider said. According to CNN, the provisional agreement on the debt ceiling will now be reviewed by both sides overnight.