After weeks of negotiations, the US can breathe a sigh of relief: The US suspended its debt ceiling on Thursday by a vote of the US Congress and, within days, dismissed the threat of default.
The world’s largest economy had until Monday to avoid bankruptcy, according to the US Treasury.
America, like almost all major economies, lives on debt. But unlike other developed nations, the United States continues to run up against a legal constraint: the debt ceiling, its maximum amount of debt, which must be formally raised or suspended by Congress.
From 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 at the White House, in small or large groups, endless negotiating sessions… Washington was suspended for weeks on end from the famous “debt ceiling” rule.
While last-minute deals are more common in these types of files, the deadlocked negotiations prompted ratings agency Fitch to put the US’s AAA rating “under watch”.
On Saturday evening, after a long holiday weekend, the two sides finally hammered out a deal with forceps.
The speech made it possible to avoid the worst: the nation’s treasuries ran dry on June 5, threatening to push the US into default.
Overnight, the country would have faced enormous difficulty in meeting its financial obligations, whether to pay salaries, pensions or repayments to creditors, and would have been forced to make tough choices.
This unprecedented situation plunged the US finances and economy, but, by extension, the international into the unknown.
Democratic President Joe Biden and Republican House Speaker Kevin McCarthy reached this compromise to avoid a potentially disastrous situation.
The agreement was already approved by an elected majority of members of the House of Representatives on Wednesday evening.
It’s now up to Joe Biden to implement it — it’s just a formality.
The text makes possible a two-year moratorium until after the presidential and legislative elections in 2024, when the U.S. debt ceiling reaches $31.4 trillion.
In exchange, Democrats agreed to some spending controls, but not as much as Republicans wanted.
That’s why many of them opposed the measure in both the House and the Senate.
“Make no mistake, there’s a lot more work to do” to clean up America’s finances, promised Republican Senator Mitch McConnell.
A major point of contention for the left is that compromise involves changes in the conditions imposed to benefit from certain social assistance.
“I cannot in my soul and conscience vote for a bill that will harm workers,” said influential Senator Bernie Sanders.
