Biden and Republicans’ preliminary deal to avoid disastrous default reaches Congress
Democrat Biden and Republican McCarthy reached the agreement after a phone conversation Saturday afternoon. The country and the world were closely following the negotiations as they awaited a resolution to a political standoff that threatened the U.S. and world economy.
WASHINGTON – U.S. President Joe Biden and House Speaker Kevin McCarthy reached a “deal in principle” to raise the nation’s debt limit, but now Congress had to rush to pass the spending cuts package in a matter of days to avoid a federal default that could prove disastrous.
However, the deal risks provoking backlash from Democrats and Republicans for the concessions made to reach it. Negotiators agreed to some of the Republican demands for increased work requirements for food stamp recipients, which had provoked outrage from House Democrats. However, they stopped short of conceding the across-the-board cuts Republicans wanted.
It will take bipartisan support to win congressional approval next week before the estimated date on which the U.S. would go into default on June 5.
Democrat Biden and Republican McCarthy reached the agreement after a telephone conversation Saturday afternoon. The country and the world were closely following the negotiations as they awaited a resolution to a political standoff that threatened the U.S. and world economy.
“The deal represents concessions, which means not everyone gets what they want,” Biden said in a statement released Saturday night. “That’s the responsibility of governing.”
Biden referred to the deal as “good news for the American people, because it avoids what would have been a catastrophic default and would have led to an economic recession, the retirement of devastated accounts and the loss of millions of jobs.”
In brief remarks on Capitol Hill, McCarthy said “we still have a lot to do.”
But the lawmaker added, “I believe this agreement in principle is worthy of the American people.”
Once the framework of the agreement is reached, it could be drafted and shared with lawmakers in time for a vote starting Wednesday in the House and later in the Senate.
One of the most important pieces is a two-year budget deal that would hold spending steady for 2024 and limit its increase to 1% by 2025 in exchange for then raising the debt limit for two years, which would postpone the politically sensitive issue until after the next presidential election.
Republicans, who fought hard to impose stricter labor requirements for government aid, got some but not all of what they wanted. The deal would raise would limit access to food stamps to able-bodied adults from age 49 to 54, but Biden won exemptions for veterans and the indigent.
An ambitious agreement was also reached on an overhaul of federal permitting to facilitate the development of energy projects. Instead, the agreement makes changes to the National Environmental Policy Act, which will designate “a single lead agency” in charge of environmental reviews, in hopes of streamlining the process.
The agreement came after Treasury Secretary Janet Yellen told Congress that the U.S. could default on its debt obligations on June 5 – four days later than previously estimated – if lawmakers did not act in time to raise the federal debt limit. Raising the debt ceiling, which now stands at $31 trillion, allows more money to be borrowed to pay the government’s already existing bills.
Biden also met Saturday with Democratic congressional leaders to discuss the status of the negotiations. The White House was scheduled to brief Democratic representatives in a video call on Sunday.
McCarthy leads a small Republican majority in the lower chamber driven by hard-line conservatives who may resist any deal on the grounds that he does not make enough spending cuts. But by seeking a compromise with Democrats to get enough votes he risks losing support among their ranks, posing a watershed moment for the new speaker’s race.
The two sides have hinted in that one of the main obstacles to reaching a deal was Republican efforts to increase work requirements for people receiving vouchers and other federal assistance, a longstanding Republican goal that has been strongly opposed by Democrats. The White House blasted the Republican proposals as “cruel and senseless.”
Biden has said that requiring Medicaid recipients to have jobs was non-negotiable. He appeared more open to negotiating changes to food stamps, known as the Supplemental Nutrition Assistance Program, or SNAP, despite objections from Democratic lawmakers.
Americans and the rest of the world were following with trepidation the negotiations, which could throw the economy into chaos and undermine confidence in the country’s leadership.
Retirees and other worried people were already making contingency plans in case their checks didn’t arrive, as the next Social Security payment was scheduled for the following week.
Yellen said that not taking action before the new deadline, “would cause hard hardship for American families, damage our global leadership position, and raise questions about our ability to defend our national security interests.”
Any deal will have to be a political compromise in a divided Congress. Many of the most conservative Republicans sympathetic to Trump have long been skeptical of the Treasury estimates and are pressuring McCarthy to hold firm.
Lawmakers are not expected to return from the Memorial Day holiday before Tuesday at the earliest, and McCarthy has promised parliamentarians that he will abide by the rule to release any bill 72 hours before voting on it.