US President Joe Biden and House Speaker Kevin McCarthy announced, Saturday, that they had reached a “principle agreement” to raise the debt ceiling, which removes the specter of a US default that was a few days away.
The House of Representatives, which is controlled by the Republicans, will vote on Wednesday on the agreement, according to Republican McCarthy, with the Senate voting on it later.
The Republican Party’s main demand of unprecedented cuts in public spending, which were stipulated in the agreement, were welcomed by the conservative lawmaker.
Biden, for his part, said that the agreement constitutes “a compromise, which means that no one will get everything they want,” stressing that the text “cuts expenses while protecting key public programs.”
This agreement came in the wake of long negotiations between the two parties before the June 5 deadline set by US Treasury Secretary Janet Yellen.
So far, the details of the agreement have not been clarified, but its broad lines have been drawn up, as it will be finalized, early this week, before voting on it.
Congressional leaders in both parties will have to persuade enough of its members to vote for the agreement, which contains provisions not supported by all lawmakers on both sides, according to CNN .
The American network reported some details of the agreement, based on a fact sheet distributed by Republicans in the House of Representatives, and a source familiar with the negotiations.
The agreement involves an increase in the debt ceiling for a period of two years.
The amount of money allowed for non-defense spending will remain mostly the same in the fiscal year of 2024, but it will increase by 1 percent in the fiscal year of 2025. There will also be an increase in the debt limit that will last for two years after the next presidential election in 2024.
The agreement includes full funding for health care for veterans, according to “CNN” and the Associated Press. The latter says the level of funding included in Biden’s 2024 budget proposal will be maintained, including funding for veterans who have been exposed to toxic substances or environmental hazards.
Under the agreement, work requirements for adults who do not have children and receive food stamps (food aid), officially known as (SNAP), will be increased, as the age of work requirements for a certain number of hours will be raised from 49 to 54, but these changes will end in 2030.
Republicans believe that this amendment would bring more Americans into the labor market, and thus pay taxes and support aid programs.
The agreement will make changes to the current work requirements of the Temporary Aid for Families in Need program.
However, the agreement would also expand waivers for veterans, homeless people and others in the food assistance program.
And the Medicaid work requirement, which House Republicans had called for, would not apply.
The agreement would eliminate an additional $80 billion in funding for the Internal Revenue Service (IRS) that Republicans say was earmarked to increase staffing at the federal agency.
The agreement includes student borrowers paying back their loans, although no date has been set for repayments to start. Student loan payments were suspended after the start of the Covid pandemic.
However, CNN’s source said the agreement keeps Biden’s plan to provide up to $20,000 per student for debt relief.
If the ceiling hadn’t been raised, the biggest economy in the world could have gone into default on June 5th. This would have made it impossible for the government to pay wages and pensions, and they would have had difficulty paying their debts too.
The United States, along with other major economies, relies on borrowing money. However, unlike some developing countries, the US regularly faces a legal obstacle known as the debt ceiling. This represents the maximum level of debt that the US government is permitted to have, and it can only be increased if Congress approves a raise.