President Biden and McCarthy reach a preliminary agreement to raise the debt ceiling

US President Joe Biden and House Republican Speaker Kevin McCarthy have reached a preliminary agreement to raise the federal government’s $31.4 trillion debt ceiling just days before the US was expected to default.

The deal represents a significant step forward and protects key priorities for both parties. However, it’s still expected to face a challenging passage through the divided Congress​​.

President Biden characterized the agreement as a compromise, stating that not everyone will get what they want. The proposed deal was reported to raise the debt limit for two years, preventing any further standoffs until after the 2024 presidential elections. Biden also mentioned that the agreement reduces spending while protecting critical programs for working people and growing the economy for everyone​​.

Speaker McCarthy indicated that the bill includes “historic reductions in spending” and “consequential reforms that will lift people out of poverty and into the workforce.” The bill is expected to be finalized and presented for a vote on Wednesday. However, to pass the bill, McCarthy will likely need support from some Democratic members given the Republicans’ narrow majority in the House​.

The deal was seen as necessary to avert an economically destabilizing default. The US Treasury Department had warned that this would occur if the debt ceiling was not raised by June 5. The long standoff over the debt ceiling had already had negative impacts, with financial markets becoming increasingly anxious and leading to higher interest rates on some US bond sales​.

Despite the reached agreement, some issues remained contentious. Republicans, who control the House of Representatives, had pushed for steep cuts to spending and for funds to be stripped from the Internal Revenue Service, the US tax agency. They had also advocated for boosting work requirements for recipients of food stamps and other federal aid programs, a proposal many Democrats oppose.

The final details of the deal have yet to be confirmed. However, it’s known that the negotiators have agreed to cap non-defence discretionary spending at 2023 levels for two years, in exchange for a debt ceiling increase over the same period​.

The path to passing the bill is delicate, with the need for a compromise that can pass both the House, which has a 222-213 Republican majority, and the Senate, with a 51-49 Democratic majority. McCarthy has promised to give House members 72 hours to read the legislation before a vote, and it will then need to pass the Senate, where at least nine Republican votes are needed​.

In the meantime, we’ll keep our popcorn ready as we watch this high-stakes drama unfold. After all, who said politics couldn’t be entertaining?