The White House and the Republican Party have reached an agreement in principle in the debt dispute. U.S. President Joe Biden and opposition leader Kevin McCarthy agreed to raise the debt ceiling to avoid a U.S. default, McCarthy confirmed in Washington on Saturday. The Biden-controlled Senate and Republican-controlled House of Representatives have yet to approve the deal.
The compromise was reached after tough negotiations and another phone call between Biden and McCarthy on Saturday. McCarthy told reporters that he would speak with Biden again on Sunday and oversee the final wording of the bill. The House of Representatives should vote on Wednesday, he announced. He did not provide further details on the content of the agreement in principle.
The negotiations took place under great time pressure. Without an agreement, the U.S. would have been threatened with default from June 5, with potentially devastating economic and financial consequences far beyond the country. Treasury Secretary Janet Yellen warned on Friday, citing the "latest data," that Parliament must raise the debt ceiling by June 5 for the administration to meet its commitments.
The dispute had been dragging on for months. High-ranking members of Biden's team had continued to negotiate during his trip to Japan for the G7 summit. Biden had previously emphasized that it had already been possible to prevent a default 78 times in US history. However, both Republicans and Democrats would have to be prepared to cut corners.
Possible resistance to the compromise
But even with an agreement between the White House and McCarthy, the debt crisis is not yet off the table: There could be resistance to the compromise in both parties, which is why majorities in both chambers of Congress are by no means certain.
The U.S. had already reached the statutory debt limit of just under 31.4 trillion dollars (around 29 trillion euros) in January. Since then, the U.S. government has been preventing insolvency with so-called extraordinary measures, but the possibilities for this are soon exhausted.
The U.S. debt limit has been suspended or raised dozens of times in recent decades under bipartisan presidents – with bipartisan majorities. This year, however, the Republicans are flexing their muscles with their new majority in the House of Representatives, which they won in the midterm congressional elections in autumn 2022.