Business & Economy

Biden, McCarthy reach ‘in principle’ deal to raise US debt ceiling

(Update 1: Adds Biden statement, details and minor edits throughout)

Washington, May 27 (EFE).- The White House and Republicans reached an agreement in principle on Saturday to raise the debt ceiling and prevent the United States from defaulting, said House of Representatives Speaker Kevin McCarthy.

“I just got off the phone with the president [Joe Biden] a bit ago. After he wasted time and refused to negotiate for months, we’ve come to an agreement in principle that is worthy of the American people,” McCarthy said in a message on Twitter.

Minutes later, in a brief press conference, McCarthy assured that the agreement includes a “historic” reduction in public spending and reforms that “will lift people out of poverty into the workforce.”

In addition, it does not contain new taxes or new government programs.

“We still have a lot more to do tonight to finish all the writing” of the agreement, warned the leader of the Republicans in Congress, who did not take questions from reporters.

An hour after McCarthy’s appearance, Biden published a statement in which he acknowledged that the agreement contains concessions from the Democrats, but maintains the “key priorities” of his government.

“The agreement represents a compromise, which means not everyone gets what they want. That’s the responsibility of governing,” he said.

“And, this agreement is good news for the American people, because it prevents what could have been a catastrophic default and would have led to an economic recession, retirement accounts devastated, and millions of jobs lost.”

The president confirmed that negotiating teams from both parties are tasked with finalizing the legislative text, which will be voted on in both the House of Representatives (controlled by Republicans) and the Senate (controlled by Democrats).

“I strongly urge both chambers to pass the agreement right away,” he concluded.

On Jan. 19, the country reached its ceiling of $31.4 trillion, which led the Treasury Department to resort to extraordinary measures to pay its bills, suspending some payments to the retirement funds of federal employees and to the social security of postal employees, among other decisions.

On Friday, Treasury Secretary Janet Yellen warned McCarthy in a letter that “based on the most recent available data, we now estimate that Treasury will have insufficient resources to satisfy the government’s obligations if Congress has not raised or suspended the debt limit by June 5.”

The debt limit is the total amount of money the US government is authorized to borrow to meet its existing legal obligations to pay Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds and other payments.

Washington must borrow money to fund the government because it spends more than it raises in taxes, and from time to time, the US faces a default because, unlike other countries, the government can only issue debt up to the limit set by Congress, which has the power to raise that ceiling as it sees fit.

Earlier this month, Yellen said a default “would produce an economic and financial catastrophe.”

International organizations such as the International Monetary Fund (IMF) have also warned about the urgent need for Congress to act to avert “very serious repercussions not only for the US but also for the global economy.” EFE

pem/tw

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