The White House and Republicans on Capitol Hill reached an agreement in principle Saturday night to expand the US debt margin, thus avoiding a financial meltdown that would hurt the global economy.
This increase must still be approved by the Capitol, but it is enough for there to be a simple majority in the House of Representatives, which is controlled by Republicans with only nine votes out of 435. Democrats are the majority in the Senate.
Republicans resisted expansion, demanding deep cuts in social spending and cutting budgets at the IRS. The United States would have become insolvent in barely a week.
House Speaker Kevin McCarthy, Republican and President Joe Biden had an hour-and-a-half phone conversation Saturday night, reaching agreement in principle on a salient detail about new staffing requirements on some Social Security benefits.
The president spends the weekend at the Camp David residence, and from there he continues to negotiate with the governors. With every day that has passed since the beginning of the year, amid intense negotiations between the two parties, the United States has come perilously close to defaulting on its debts, and to a situation of general bankruptcy that, according to economists, could lead to a global crisis. recession.
The new agreement extends the borrowing term to 2025. In turn, it froze domestic spending and implemented new work requirements for those receiving food aid from the federal government, the Washington Post revealed last night.
The agreement has serious internal resistance within both parties. Above all, they are opposed by a few Republicans in the fiscally conservative wing of the party, who believe their leader has not been given enough concessions and cuts.
Even the Republican-based Freedom Caucus tweeted that the terms were unacceptable, and they could vote against them. McCarthy, the Speaker of the House who negotiated with Biden, was only able to win the position after 15 votes, due to the resistance of that group and other like-minded Representatives.
What is known as the debt ceiling is a legal limit to the amount of debt that the US federal government can issue to finance itself. It was introduced by law in 1974, and has been amended periodically since then. When the debt ceiling is reached, as in this case, the Capitol must increase it or the government will not be able to borrow more money to fund its expenditures.
The current debt limit of the United States is $31.4 trillion (€28.5 trillion at current exchange rates). In fact, the US Treasury hit that cap in January 2023 and is taking extraordinary steps to keep paying the bills, especially at a time of rising military spending to help Ukraine fight off the Russian invasion.
The federal government borrows on average more than $7 billion per business day. Raising the debt ceiling does not increase federal spending beyond what Congress has already approved; It simply allows the government to pay for acquisitions and commitments it has already made.
The current GDP of the United States, according to the federal government’s own figures, is $26.4 trillion annually. Since the passage of the Budget Control Act, the debt ceiling has changed 78 times, 49 times under Republican presidents and 29 times under Democratic presidents, according to the Treasury Department.
