Congress passes US debt ceiling deal

After weeks of negotiations, America can breathe: By a vote of the US Congress, the United States on Thursday suspended its debt ceiling and dismissed the threat of default within days. President Joe Biden said, “This is a huge victory for the economy and for the American people.” According to the US Treasury, the world’s largest economy had until Monday to avoid bankruptcy.

“A default would cause severe hardship for American families, resulting in the loss of millions of jobs and trillions of household assets,” Treasury Secretary Janet Yellen said in a statement.

America, like almost all major economies, lives on credit. But unlike other developed nations, the United States regularly comes up against a legal hurdle: the debt ceiling, its maximum indebtedness, which must be formally lifted or suspended by Congress.

hard bargain

Through this routine legislative process, Republicans, the majority in the House of Representatives, and their boss, Kevin McCarthy, have created an instrument of political pressure against Democratic President Joe Biden. A series of meetings in the White House, in small or large committees, endless negotiating sessions … The whole of Washington was suspended for weeks by the fate of the famous “debt ceiling”.

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Even though last-minute agreements are very common on this type of file, these endless negotiations have prompted rating agency Fitch to place the United States’ AAA rating “under watch”. On Saturday, in the midst of a long holiday weekend, the two sides finally reached a settlement in tongs. This lesson has made it possible to avoid the worst: that the country’s coffers will run dry on June 5, risking pushing the United States into default.

Overnight, the country would find itself at great difficulty in honoring its financial commitments, whether in terms of salaries, pensions or reimbursement to its creditors, and would be forced to make tough choices. This unprecedented situation would have plunged into the unknown US finance and economy, but by extension, the international one as well.

speech by joe biden

Democratic President Joe Biden and Republican House of Representatives boss Kevin McCarthy reached an agreement to avoid a scenario with potentially disastrous consequences. The agreement was already approved on Wednesday evening by a large majority of the elected members of the House of Representatives.

Now it’s up to Joe Biden to enact it — a mere formality. The Democratic leader said he was “eager” to do so. The president also said he would address the American people on Friday evening to detail the outline of the text.

In particular, the agreement makes it possible to suspend, for two years, the maximum amount of United States indebtedness, currently at $31.4 billion, until after the 2024 presidential and legislative elections. In return, the Democrats agreed to limit some spending, but not as much as Republicans wanted.

“Still a lot to do”

This is why many of them opposed the measure in both the House and the Senate. “Make no mistake, there is still a lot to be done” to clean up US finances, assured Mitch McConnell, the Republican term in the Senate.

A major point of contention for the Left, the agreement includes amendments to the conditions imposed for benefiting from some social assistance. Influential Senator Bernie Sanders said, “I cannot in my soul and conscience vote in favor of a bill that harms workers.”

(with AFP)