Global Courant 2023-05-30 22:33:17
Washington, DC — After weeks of talks and warnings of a possible economic disaster, the White House and congressional leaders in the United States have reached a deal to raise the debt ceiling, a deal that lawmakers must now pass into law before the US defaults on its commitments fulfills .
The crisis and its resolution took months. They go back to the November 2022 midterm elections, when Republicans won a narrow majority in the U.S. House of Representatives, depriving President Joe Biden’s Democratic Party of the ability to pass legislation on its own.
The deal negotiated by Biden and Republican House Speaker Kevin McCarthy would suspend the debt ceiling for two years and limit government spending over the same period.
It would also strengthen the Pentagon’s budget and add new restrictions on receiving food benefits, while diverting some funds from the Internal Revenue Service (IRS) and streamlining permits for energy projects.
The deal, which would avoid a feared bankruptcy, checked some items on the Republican wish list to control government spending without fundamentally changing the way the administration operates under Biden.
Al Jazeera takes a look at how the debt ceiling emerged and what comes next.
What is the debt ceiling?
Like most countries, the US depends on tax revenue and borrows money to meet its financial obligations. This includes funding for social programs, the military, government employee salaries, and paying off old debts.
However, US law limits how much the government can borrow – the so-called debt ceiling. Every few years, Congress has to raise that limit. It currently stands at $31.4 trillion.
The debt ceiling has been raised dozens of times in recent decades. The legislative process often proceeds without controversy. But this year, McCarthy sought policy concessions in exchange for raising the limit.
Both chambers of Congress — the House and Senate — must pass legislation to allow the government to borrow more money. Republicans took control of the House of Representatives in the November vote, giving them the power to block legislation.
The White House’s original position was that the debt ceiling should not be used as a bargaining chip by Republicans. Biden administration officials argued that it is the responsibility of lawmakers to make sure the US pays what it owes.
“The debt limit does not authorize new spending commitments. It simply allows the government to fund existing legal obligations that Congresses and presidents of both parties have entered into in the past,” the Treasury Department said in a fact sheet.
But Republicans pushed to tie the debt ceiling to government spending, which they say has gotten out of hand under Biden.
And so the impasse began at the beginning of this year.
As the government approached its borrowing limit, panic ensued over the US’s ability to have money to operate while avoiding default on previous debts, which would shake global confidence in the US government as a borrower.
McCarthy’s bid as speaker
Internal Republican politics may have contributed to the impasse. In January, it took 15 rounds of voting for McCarthy to be elected speaker after a group of far-right lawmakers thwarted his bid to run the House.
To win over the Republican dissenters, McCarthy had to adopt parts of their ultra-conservative agenda, including a commitment to limit government spending.
Some Democrats predicted that the Republican infighting revealed by the election of the speakers would lead to a deadlock in the debt ceiling.
“McCarthy just struck a deal with far-right insurgents that would hold the entire US and global economy hostage through extreme cuts in everything from housing to education, healthcare, social security and healthcare,” Congresswoman Ilhan Omar wrote on Twitter at the time.
In April, McCarthy introduced a bill to raise the debt ceiling that would advance key Republican policy priorities: limiting government spending for the next decade, ending Biden’s student loan forgiveness plan and cutting IRS funding.
The Republicans in the House of Representatives narrowly passed that measure later this month without the support of the Democrats. But the bill was dead upon arrival in the Democrat-controlled Senate.
The conversations begin
At the beginning of the year, the Biden administration labeled the debt ceiling a “non-negotiable” issue.
“Raising the debt ceiling is not a negotiation; it is an obligation of this country and its leaders to avoid economic chaos,” White House press secretary Karine Jean-Pierre said in January.
Biden said he would be willing to talk about the budget and specific spending, not the government’s borrowing limit.
But with Republicans showing no signs of willingness to raise the limit unconditionally and the clock ticking on a possible default, Biden met with congressional leaders — including McCarthy — at the White House on May 9 to discuss the issue.
Talks between Biden and McCarthy would continue directly and indirectly throughout the month. Earlier in May, the president interrupted a visit to Japan to attend the G7 summit to return to negotiations.
Last week, Treasury Secretary Janet Yellen sent a letter to McCarthy warning that the government could run out of money by June 5 if the debt limit issue is not resolved.
“The failure of Congress to raise the debt limit would cause serious problems for American families, damage our global leadership position and raise questions about our ability to defend our national security interests,” Yellen wrote.
After several rounds of talks, McCarthy and Biden announced a tentative deal on Sunday, with the president touting the breakthrough as an important step that “takes the threat of catastrophic bankruptcy off the table.”
What happens now?
Now Congress must pass a bill reflecting the deal, called the Fiscal Responsibility Act of 2023. Its drafters expected it to pass, but not without opposition.
Progressives and right-wing lawmakers alike have expressed doubts about the deal. Conservative Senator Rand Paul called the budget caps “fake cuts” that “fake conservatives” agreed to.
Republican congressman Matt Rosendale said in a statement that the legislation “fails to cut spending and continues to fund the radical agenda of the Democrats and Biden administrations,” and vowed to vote against it.
Congresswoman Nancy Mace, a Republican, also said she was a “no” on the bill.
Washington is broken.
Republicans have been outsmarted by a president who can’t find his pants.
I’m voting NO to the debt ceiling debacle because playing the DC game isn’t worth selling out our kids and grandkids.
— Representative Nancy Mace (@RepNancyMace) May 30, 2023
Congresswoman Pramila Jayapal, chair of the Congressional Progressive Caucus, told CNN that cutting IRS funding and adding restrictions to food aid is “bad policy.”
Asked if progressives will oppose the bill, Jayapal said congressional leaders “should be concerned” about that prospect.
The House will consider the bill on Tuesday before a full vote on Wednesday. Then the Democratic-controlled Senate will take it up later this week.
