Biden expresses optimism about reaching an agreement with the Republicans “very soon.”
US President Joe Biden has expressed optimism about the possibility of reaching a deal with House Speaker Kevin McCarthy and the Republicans on raising the debt ceiling. He told reporters, before traveling to Camp David for the Memorial Day vacation, that he expects to conclude a deal very soon, stressing that he is very optimistic.
He added, “Negotiations are ongoing and things are looking good, and I hope that within hours we will know if we are able to get a deal.”
This came as US Treasury Secretary Janet Yellen announced a new deadline for default by the fifth of June, starting from the first of the month, giving the White House and Republicans more time to conduct negotiations to reach a raise to the legal limit for the US debt.
Yellen said in a new warning that not making a decision by the new date would cause great suffering to American families, harm the prestige of the United States, and raise questions about the ability to defend US national security interests.
Indeed, positive signs of hope have emerged in the ongoing discussions between the White House and Republicans in Congress about a possible deal to raise the US government’s debt ceiling of $31.4 trillion.
A US official told reporters that talks are continuing to finalize a deal that would allow a two-year raise in the debt ceiling in exchange for imposing spending restrictions on many government programs. There was agreement on key contentious issues, such as spending caps and funding for the Internal Revenue Service and the military, but the sticking point remained over tightening anti-poverty programmes.
Leaks published by the Reuters news agency and the New York Times indicated that the potential deal achieves victories for both parties, as under the deal the US debt ceiling will be raised for a period of two years until after the 2024 US presidential elections, and in return strict spending restrictions will be imposed. In military and veterans’ benefits, only a 3 percent increase in defense spending will be allowed for 2024, with no increase in non-defense spending.
The deal includes modernizing electricity networks and supporting select energy projects, an important goal of President Biden’s record, and in exchange allowing for more fossil fuel permits to major oil companies that the Republican Party supports.
An official said the deal could also reduce funding for the IRS. Republicans are seeking to roll back a big budget hike for the tax agency that Democrats approved last year to boost enforcement, which would help boost revenue and reduce the deficit. The deal will leave many other details to be ironed out in the coming weeks and months.
Kevin McCarthy, Speaker of the House of Representatives, said on Friday that the two sides had made progress, indicating that there was serious work to conclude a deal to raise the debt ceiling before the looming deadline. He stressed that there was still a lot of work to be done.
Under this potential deal, the Republicans will be able to promote that they have succeeded in cutting federal spending, and the Democrats can promote that they have succeeded in preventing large cuts in spending.
Each side will have to persuade enough members of their party in a narrowly divided Congress to vote on any final deal.
“What we’re talking about now is a middle ground where Democrats and Republicans can come together,” Representative Sharis Davis, a Kansas Democrat, told Bloomberg.
For her part, Kristalina Georgieva, Director of the International Monetary Fund, urged the United States to make unremitting efforts to reduce public debt. She said delays in doing so could create avoidable risks.
A statement by the International Monetary Fund said that the brinkmanship policy on the federal debt ceiling could bring about systemic risks to both the United States and the global economy, at a time when there are already clear pressures.
In its statement on the Article IV consultations – concerned with assessing the economic developments of a country -, the fund emphasized raising the debt ceiling to avoid exacerbating downside risks in the markets.
Retraction of the Fourteenth Amendment
And Wally Adimo, the US Deputy Secretary of the Treasury, had indicated that President Biden would not resort to the Fourteenth Amendment to continue raising the debt ceiling, and he said in statements to CNN, on Friday morning, that Badin does not see that this can solve the problem, and stressed That’s the White House officials who have indicated that the Fourteenth Amendment, which provides that the validity of the US public debt may not be questioned, is not a viable way to circumvent arduous debt-ceiling negotiations with Republicans.
The standoff has investors jittery and has pushed up government borrowing costs by $80 million so far, according to Deputy Treasury Secretary Wally Adeyou.
Treasury Secretary Janet Yellen had warned over the past days and weeks that the US Treasury would not only be unable to cover all its obligations as soon as possible from June 1, but also laid out plans to sell $119 billion worth of debt due on that date. , which indicates, according to some market observers, that it is not a deadline fraught with immediate risks.
Several credit rating agencies have said they have put the US on review for a possible downgrade, which would raise borrowing costs and undermine the US’s position as the backbone of the global financial system. A similar standoff in 2011 led Standard & Poor’s to downgrade its US debt rating.