After marathon negotiations, a final bipartisan agreement to raise the U.S. debt ceiling is ready and now heads to Congress, where it must be approved to avoid a catastrophic default, President Joe Biden and Republican leader Kevin McCarthy said Sunday.
Biden urged congressmen to approve the text that, although it moves the country away from the economic precipice, does not guarantee the necessary support for a quick approval in the House of Representatives (Lower) and the Senate.
"We have reached a bipartisan budget agreement that we are about to submit to Congress," Biden said in a brief appearance before the media Sunday night at the White House.
The 99-page text still needs to be approved by both houses of Congress. Photo: AP
"It takes the threat of catastrophic default off the table, protects our hard-won historic economic recovery, and ... It represents a compromise that means no one gets everything they want," the Democratic president continued.
On Sunday, Biden and McCarthy, the Republican leader of the House of Representatives, finalized an agreement in principle on raising the debt ceiling, announced on Saturday and that allows to avert the threat of a default on June 5, when the Treasury estimates that the government will begin to run out of money to pay its bills and honor its debts.
This agreement was going to Congress on Monday despite being a Pentecost holiday in the United States.
What does the agreement say?
The 99-page text still needs to be approved by both houses of Congress.
It was released Sunday night and will still be the subject of intense scrutiny and debate in the coming days in both ranks.
Some of the demands of both sides were not accepted, such as the elimination of certain tax loopholes, requested by the Democrats, and the repeal of clean energy tax credits, which Republicans sought.
Formally known as the Fiscal Responsibility Act of 2023, the bill calls for eliminating the $31.4 trillion debt ceiling over two years, meaning Biden won't need to negotiate it again before the 2024 presidential election.
Kevin McCarthy greets President Biden. Photo: Reuers
The deal also imposes limited restrictions on federal spending that will please some Republicans, but it doesn't deliver the big cuts that more conservative Democrats wanted and that more progressive Democrats would have resisted.
The agreement keeps non-military spending roughly stable for fiscal 2024 starting this year, and caps the increase at 1% by 2025, according to sources close to the negotiations.
It also maintains the Biden administration's plans to increase spending for active and retired military personnel, in line with inflation.
The agreement also reduces the funds allocated for the expansion of the Internal Revenue Service (IRS). Last year, Congress approved $80 billion for the IRS to boost tax enforcement and oversight. The debt ceiling deal would cut him by $000 billion for spending in other areas.
The deal would also bring back some resources that Congress appropriated for the coronavirus pandemic but were not used. In a statement, McCarthy's office said the deal would rescind "billions of unspent covid funds" but offered no further details.
There will be no change from Medicaid, the government's health insurance program for the most disadvantaged Americans.
The agreement establishes work requirements for people receiving federal food assistance or family benefits, a victory for the Republican side.
The age at which childless adults are required to work to receive food stamps is also expected to increase from 49 to 54. As a concession to Democrats, the deal is expected to relax requirements for retirees and the homeless.
The fight in Congress
"This agreement now goes to the House and Senate. I strongly urge both chambers to pass it," Biden said.
Biden invited both chambers to approve the deal. Photo: Reuters
The text reached the lower house on Monday. And McCarthy has called for a vote in favor next Wednesday in the House of Representatives, where his party's slim majority will require significant support from Democrats to offset Republican dissent.
Opposition to the bill comes, on the one hand, from the more right-wing of Republicans, who want further cuts in public spending, and on the other, from progressive Democrats who did not want any reductions.
Getting the deal passed will be a major test of Biden and McCarthy's leadership in their respective parties and their powers of persuasion to attract skeptics.
June 5, deadline
The countdown to June 5 means the law will have to be voted on in Congress much faster than usual times to pass even less controversial bills.
McCarthy hopes to count on the narrow majority of the House of 222 Republicans, but opposition will come from 35 far-right lawmakers who told him to stand firm on more sweeping spending cuts.
That means large numbers of Democrats will have to be persuaded to vote alongside a small number of Republicans, something that rarely happens with big bills.
If a default still occurs, the government would not miss loan payments until mid-June, but in the meantime it would likely have to halt issuing $25 billion in Social Security payments and federal wages.
The battle has been closely watched by major ratings agencies, with Morningstar and Fitch warning they could opt for a downgrade of the country's rating even if the crisis is avoided.
Clarín newsroom with information from the Associated Press and AFP