WASHINGTON, May 27 (Reuters) – US President Joe Biden and Republican top congressman Kevin McCarthy reached a preliminary agreement on Saturday night to suspend the federal government’s $31.4 trillion debt ceiling, ending a months-long stalemate.
However, the deal was announced without any glee, in terms that reflected the acrimonious tenor of the negotiations and the difficult path it must take through Congress before the United States runs out of money to pay its debts by early June.
“Just called the president. After he wasted time and refused to negotiate for months, we have reached an agreement in principle worthy of the American people,” McCarthy tweeted.
Biden called the deal “an important step forward” in a statement, saying: “The deal is a compromise, which means not everyone gets what they want. That’s the responsibility of governing.”
The deal would suspend the debt limit until January 2025, while capping spending in the 2024 and 2025 budgets, recovering unused COVID funds, speeding up the permitting process for some energy projects and requiring additional work for food relief programs for poor Americans.
After months of back and forth, the preliminary agreement came about in a flurry of phone calls. Biden and McCarthy had a 90-minute phone call earlier Saturday night to discuss the deal, McCarthy briefed his members later that night, and the White House and the House leader spoke afterwards.
“We have more work to do tonight to finish writing it,” McCarthy told reporters on Capitol Hill. McCarthy said he expects to finalize the bill on Sunday, then speak with Biden and vote on the deal on Wednesday.
Biden and McCarthy must tread carefully to find a compromise that the House, with a 222-213 Republican majority, and the Senate, with a 51-49 Democratic majority, can pass — meaning it needs bipartisan support before it can go ahead. the president can sign it.
Negotiators have agreed to limit discretionary spending on non-defense activities to 2023 levels for one year and increase it by 1% in 2025, a source familiar with the deal said.
“It has historic cuts in spending, the ensuing reforms that will move people out of poverty into the labor market, reining in government outreach — there are no new taxes, no new government programs,” McCarthy said.
The deal will avoid an economically destabilizing bankruptcy, so long as it manages to make it through the narrowly divided Congress before the Treasury Department runs out of money to meet all its obligations, which it warned on Friday will happen if the issue of the debt ceiling is not resolved. resolved on June 5.
[1/6] General view of the US Capitol after US House Speaker Kevin McCarthy (R-CA) reached a tentative deal with President Joe Biden to raise the United States debt ceiling and avoid a catastrophic default, in Washington, US, May 27, 2023 REUTERS/Nathan Howard
Republicans who control the House of Representatives have been pushing for significant cuts and other conditions, and were sharply critical of the deal when the first details were reported.
Republican Representative Bob Good, a member of the conservative House Freedom Caucus, tweeted that he heard the deal would raise debt by $4 trillion, adding, “IF that’s true, I don’t need to hear anything else. No one is claiming being conservative might warrant a YES vote.”
North Carolina’s Dan Bishop described the deal earlier Saturday as “utter capitulation in progress. On the side holding the cards.”
A senior member of the House Freedom Caucus said they were gauging member sentiment and weren’t sure what the vote numbers might be.
TAXES US. CUTS
Republicans say they want to cut spending to slow the growth of US debt, which is now about equal to the annual output of the country’s economy. Biden and Democrats have pushed for taxes to be raised on the wealthy and corporations to reduce debt while increasing spending on programs like free community college.
The long deadlock in raising the debt ceiling spooked financial markets, depressed stocks and forced the United States to pay record high interest rates on some bond sales. Bankruptcy would take a much heavier toll, economists say, likely sending the country into recession, shaking the global economy and leading to a spike in unemployment.
Biden refused to negotiate future cuts with McCarthy for months, demanding that lawmakers first approve a “clean” debt ceiling increase with no other conditions, and present a 2024 budget proposal to counter his March budget.
Two-way negotiations between Biden and McCarthy began in earnest on May 16.
The work to raise the debt ceiling is far from done. McCarthy has vowed to give members of the House of Representatives 72 hours to read the legislation before putting it to a vote.
That will test whether enough moderate members support the compromises in the bill to overcome opposition from both far-right Republicans and progressive Democrats to reach a simple majority vote.
Then it must go through the Senate, where it needs at least nine Republican votes to pass. There are plenty of opportunities in each room along the way to slow down the process.
Reporting by Moira Warburton, Steve Holland and Katharine Jackson; Written by Andy Sullivan; Adapted by Scott Malone, Frances Kerry, Daniel Wallis, Heather Timmons, Dave Gregotio, Chizu Nomiyama and Kim Coghill