Biden, McCarthy agree to two-year deal to raise debt ceiling

The impending debt ceiling crisis is a big step forward to be averted.

Key points to remember

  • President Joe Biden and House Speaker Kevin McCarthy have reached an agreement in principle to raise the debt ceiling for two years.
  • The deal could save the government from defaulting on its debts if the Senate and House of Representatives pass it before the United States runs out of money to pay its bills, which could be as soon as June 5.
  • The last-minute deal would keep non-military discretionary spending roughly stable at current levels for fiscal year 2024 and increase it by 1% in 2025.

President Joe Biden and House Speaker Kevin McCarthy have reached an agreement to increase the national borrowing limit for two years.

The deal still needs to pass the Republican-controlled House of Representatives and the Democratic-controlled Senate if the government is to avoid running out of money to pay bills and potentially missing some payments, a date that could come as soon as June 5. Treasury Secretary Janet Yellen warned.

In January, the national debt exceeded the $31.4 trillion limit set by Congress. The country has since continued to pay its bills on borrowed time by reorganizing payments and using other tactics the Treasury calls “extraordinary measures.”

Under the terms of the agreement, the debt ceiling would be raised by two years, meaning it would not be reached again until after the 2024 elections. Non-military spending would remain stable in the fiscal year. 2024 and would increase by 1% in 2025. The agreement also extends working requirements for able-bodied adults to receive food stamps until age 54 starting at age 49, with exemptions for veterans and those without -shelter.

If the deal is done and the debt ceiling is raised before the government runs out of cash, it will be the fourth time since 1995 that the government has narrowly avoided a default.

Though eventually resolved, the latest debt limit standoff has rattled financial markets and prompted a major credit agency to warn it could downgrade the government’s credit rating.

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