2023-05-30 07:00:00
FAQ Why the settlement in the US debt dispute is an expensive compromise
Kevin McCarthy, Republican Speaker in the House of Representatives, and US President Joe Biden were able to agree on a compromise in the US debt dispute
© IMAGO/Zuma Wire
30.05.2023, 6:00 p.m. 3 min.
Democrats and Republicans have apparently reached an agreement in the US debt dispute. However, the compromise still has to clear one important hurdle. The most important questions and answers
The worst scenario seems to have been averted for the time being: US President Joe Biden and the Republican Speaker of the House of Representatives, Kevin McCarthy, have agreed to raise the US debt limit. However, there are still a few steps to be taken before the compromise has actually passed through all instances. And whether that can also happen within the calculated deadline of June 5 is just as uncertain. The risk of non-payment remains, especially since the opponents of the package are already forming up. What they criticize, what the deal looks like, and what hurdles still have to be overcome: four questions and answers,
What are the key points of the package?
First of all: The deal is clearly a compromise in which both sides have to cut back. However, the ultimate goal will be achieved – Biden and McCarthy have agreed on a new debt ceiling for the next two years, which gives both sides breathing room in the upcoming presidential election campaign.
The agreement stipulates that the Biden government may limit the budget in the coming year to the level of the current budget year at most. In 2025, this value may only increase by around one percent, although defense spending is excluded from this. On the subject of social benefits, the Republicans were able to push through stricter requirements. Support measures such as food stamps are to be linked more closely to a job. In addition, tax investigators are to receive fewer funds and unused corona aid funds are to be reallocated.
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On the other hand, the Democrats appear to be gaining ground on new energy projects. If Republicans and Democrats actually get a “permitting reform” off the ground, that would be good for Biden’s climate protection projects – but also for developing new oil and gas fields.
What do the opponents of the package criticize?
Criticism of the package comes primarily from ultra-conservatives, for whom the cuts do not go far enough. Former US President Donald Trump called for the compromise to be blocked. A default is more manageable than “a bad deal,” Trump said. Texan Chip Roy describes the package as a “shit sandwich” and Ralph Norman from South Carolina as “crazy”. There was also criticism among Democrats because Biden had given way too much on social benefits. Ultimately, however, the criticism was much more reserved than that of the Republicans.
What hurdles still have to be overcome?
The first critical test for this is on Wednesday in the House of Representatives. Since many MPs did not return to Washington until this Tuesday due to Memorial Day, and McCarthy only has a small majority in the House, he will probably have to do convincing work until the end. Many MPs did not want to comment on their position in advance. But if the package actually goes through on Wednesday, it could also pass the Senate at the weekend. Everyone is looking to June 5th, the day when the United States would probably become insolvent. Even if the package passes the House on Wednesday, nothing must go wrong so that it also goes to the Senate at the weekend.
Comment
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In the dispute over a new upper limit for the national debt, Democrats and Republicans are getting closer. But the Kulturkampf will continue in the background – and will be additionally fueled by the money
However, President Biden and McCarthy were confident that everything would go smoothly. McCarthy told Fox News, “I think the majority of Republicans will vote for this bill.” President Biden is behind the text, “so I think a lot of Democrats will vote for it, too.”
Biden said Saturday it was an important advance that would reduce spending while protecting vital programs for working people and strengthening the economy for all. In addition, the agreement secures the most important parts of his agenda. However, the 80-year-old also acknowledged “that not everyone gets what they want.” McCarthy spoke of an “agreement worthy of the American people.”
How are the markets reacting?
Unsurprisingly, the markets reacted positively again at the start of the week. US futures continued their rally on Friday, and in Germany the Dax has meanwhile risen to over 16,000 points again. However, investors had already priced in the agreement on Friday, which is why the upward swings were now limited.
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