/ 29 May 2023

Debt deal done. Now the hard part

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THE SQUIZ

Days away from what would be a “catastrophic” economic event, US President Joe Biden and top Republican, House Speaker Kevin McCarthy, have struck a deal. In exchange for authorising America’s federal government to borrow enough money to function for the next 2 years, the deal would cap federal spending to current levels and tighten some welfare rules. Biden said the agreement “represents a compromise, which means not everyone gets what they want.” But even though the 2 most senior elected representatives from the major parties have come to a resolution, there’s still a lot more to do to avoid the government defaulting on its debt for the first time in history…

HANG ON – IT’S NOT OVER?

US Government rules mean the debt ceiling deal has to pass Congress before being signed into law by President Biden. That needs to happen before the government runs out of money on 5 June – the revised date that was confirmed by Treasury Secretary Janet Yellen late last week. Here’s where things get political… Republicans have a small majority in the House of Reps where a group of hardline Trump supporters have previously said they would only support a deal with drastic spending cuts – which this deal doesn’t have. So that could be an issue… Then the bill will go to the Senate, where it’ll also need solid bipartisan support. 

SO WILL THE DEAL GET THROUGH?

Expect drama. That’s what commentators in the US say because many Democrats and Republicans are unhappy with aspects of the deal. “No one claiming to be a conservative could justify a YES vote,” one Republican lawmaker tweeted. And there’s a political pratfall for McCarthy to keep in mind over the next week with some unhappy Republicans lining up to boot him out of the leadership. Long story short, the deal will start going through the legislative process from Wednesday, so get ready for a big week in American politics… 

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