The White House and House Republicans reached an agreement in principle on Saturday to raise the debt ceiling and avert a default.
House Speaker Kevin McCarthy said that after speaking with President Joe Biden, they had “come to an agreement in principle that is worthy of the American people.”
He told reporters that he planned to brief members and post the text of the bill on Sunday, with a vote on Wednesday. McCarthy did not go into details, but said that the deal was for “historic reductions in spending” and that it included “consequential reforms that will lift people out of poverty into the workforce.”
There were reports that the agreement calls for the ceiling to be raised through 2025, and that non-defense spending would remain at 2023 levels. No changes would be made to Medicaid, but time limits would be placed on the Supplemental Nutrition Assistance Program to people up to age 54, with a sunset of 2030. That reportedly includes “enhanced” work requirements, a key sticking point in the negotiations. More specific details have not yet been released.
The agreement was reached with little time to spare, given a deadline of June 5. That is the date that Treasury Secretary Janet Yellen said that the U.S. government will default on its debt if the $31.4 trillion debt ceiling is not raised.
For months, Biden and McCarthy have been engaged in a high stakes game of political brinksmanship. The president initially said that he would not engage in negotiations over anything other than a raising of the debt limit, warning of the dire consequences that would result to the U.S. and world economy should the country default. McCarthy, elected after making a series of concessions to the party’s right wing, has sought budget cuts and other concessions in exchange for rallying his caucus members to vote to raise the ceiling, something that his detractors, as well as Rep. Matt Gaetz (R-FL) have compared to a form of hostage taking.
“We now estimate that Treasury will have insufficient resources to satisfy the government’s obligations if Congress has not raised or suspended the debt limit by June 5,” Yellen wrote on Friday. She had previously estimated the date as early as June 1, but provided an update as negotiations continued this week.
Wall Street markets closed higher on Friday in anticipation of a deal. But there has been a great deal of uncertainty around the talks, and the next step will be for congressional leaders to convince members to support the deal. That will likely be an intricate process of whipping votes, with the likelihood that vocal contingents in each party will be opposed to it. When he was lining up votes to become speaker, McCarthy agreed to give members 72 hours to review bill text before a vote, something that may only give opponents more time to stir up opposition.
The U.S. has never defaulted on its debt, and just the possibility of such a scenario has in the past sent markets into wild fluctuations. That happened in 2011, when Republicans refused to raise the debt ceiling unless then-President Barack Obama agreed to a series of future spending limits. A deal was reached two days before the U.S. ran out of money. Even though a default was averted, the U.S. credit rating was downgraded and borrowing costs went up by $1.3 billion, according to the Government Accountability Office.
