2023-06-05 18:29:26
The president of the United States, Joe Biden, enacted the endorsed law last week in Congress after weeks of arduous negotiations between Democrats and Republicans that suspends the debt limit until 2025 and thus allows the country to avoid default. Without this legislation, the world’s largest economy risked not being able to meet its debt commitments from Monday.
“When I took office, the deficit had increased each of the previous four years. Our bipartisan budget deal will build on our progress to turn that tide,” he warned. Biden this Sunday on his Twitter account. The Democratic president assured that he fought to “secure a budget agreement that projects Social Security, the Medicare plan, the ACA (Patient Protection Act) and the programs that millions of working Americans trust.”
The details of the agreement
The measure suspends the debt ceiling for the next two yearsuntil after the presidential elections of November 2024. Specifically, it suspends the current debt limit of 31.4 trillion dollars until January 1, 2025. In exchange, the agreement reached over the weekend contemplates, among others, caps on spending on programs funded by Congress in areas such as health, education, justice or environmental protection.
In parallel, it cuts part of the new funds destined to the public Treasury to reallocate them to items that are not defense and contemplates the resumption of payments by university students of the debt they have accumulated. At the same time, tightens the work requirements to access social benefits, such as food stamps, and rescinds unspent $28 billion that had been allocated to pandemic relief programs.
Tug of war in Congress
The legislation, which had been approved by the House of Representatives on Wednesday, is the result of an agreement reached after several days of marathon negotiations between Biden and the speaker of the Lower House, the Republican Kevin McCarthy. Its approval by the Senate in the early hours of Friday, where it reached a comfortable majority of 63 to 36, came a few days before the country’s treasury ran out of liquidity, which was scheduled for Monday, June 5, according to Treasury Secretary Janet Yellen’s estimate.
“Nothing would have been more irresponsible. Nothing would have been more catastrophic”pointed Bidenwho had admitted that “nobody gets everything they want in a negotiation”. The terms of the bipartisan agreement were opposed by several conservative Republican lawmakers, who believed the spending cuts were not enough, as well as by some progressive Democratic congressmen, who believed they went too far.
Biden thinks about 2024
“Finding a consensus beyond partisan differences is difficult. Unity is difficult, but we must never stop trying,” said Biden, who thus repeated the message of reconciliation that marked the beginning of his term and is now the slogan of his campaign for 2024. Biden promotes himself as a fighter for social and fiscal justice and repeated several times that he opposes massive budget cuts that would affect the most precarious workers and households.
In his speech on Friday, Biden defended a tax increase on the richest and highlighted the bipartisan work to reach an agreement: “Both parties acted in good faith. Both parties kept their word.” The United States exceeded the maximum limit for issuance of public debt in January, which is 31.4 trillion dollars, and since then extraordinary measures have been applied that only allowed it to meet the obligations for a while.
Biden initially wanted to pass the debt ceiling increase without conditions, but after months of negotiations he had to give in to McCarthy and the Republicans, who said they would not pass it without spending cuts. The debt limit was raised more than a hundred times to allow the government to meet its spending commitmentsusually without drama and with the support of Democrats and Republicans.
Both sides see raising the debt limit as bad politically, but acknowledge that failing to do so would plunge the US economy into recession, also rattling world markets. Despite the fact that the country avoided a default, the Fitch agency decided to keep the outlook for the US debt rating on “negative watch” while it assesses “the full implications of this episode.”
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