Biden and Republicans reach debt ceiling agreement, now Congress must approve it to avoid a catastrophic default

WASHINGTON (AP) — President Joe Biden and House Speaker Kevin McCarthy have reached an “agreement in principle” to raise the country’s statutory debt ceiling, but now Congress must pass the spending cut package within days to avert a crisis possibly catastrophic US default.

The agreement could anger both the Democratic and Republican sides as lawmakers begin unveiling concessions to the compromise on Sunday. Negotiators agreed to some Republican calls for an increase Labor Requirements for Food Stamp Recipients That had caused an uproar among the Democrats in the House of Representatives as non-starters. However, they failed because of the larger overall spending cuts desired by Republicans.

Bipartisan support will be needed to win Congressional approval before a US government default on June 5.

The Democratic President and Republican Speaker reached the settlement after the two spoke by phone Saturday night. The country and the world I have watched and waited for a resolution to a political standoff that threatened the US and world economy.

“The agreement represents a compromise, which means not everyone gets what they want,” Biden said in a statement late Saturday night. “That is the government’s responsibility,” he said.

Biden called the agreement “good news for the American people because it averts a catastrophic default that would have led to an economic recession, the destruction of retirement accounts and the loss of millions of jobs.”

McCarthy said in a brief address at the Capitol, “We still have a lot of work to do.”

But the Republican spokesman said, “I believe this is a fundamental agreement worthy of the American people.”

Once the outlines of an agreement are in place, the bill could be drafted and submitted to lawmakers in time for votes in the House of Representatives on Wednesday and later next week in the Senate.

At the heart of the package is a two-year budget deal that will keep spending unchanged through 2024 and increase it by 1% through 2025 in exchange for a two-year debt ceiling hike, postponing the hot-button political issue beyond the next presidential election .

Republicans pushed hard for a deal to impose stricter labor requirements on recipients of federal aid, and got some, but not all, of what they wanted. The agreement would raise the age for existing work requirements for able-bodied adults without children from 49 to 54, but Biden was able to push through exemptions for veterans and the homeless.

Both sides had also sought an ambitious overhaul of federal permits to facilitate the development of energy projects. Instead, the agreement would bring about changes to the landmark 1970s National Environmental Policy Act that would designate “a single lead agency” for developing environmental assessments in hopes of streamlining the process.

The deal came after Treasury Secretary Janet Yellen told Congress the United States could default on its debt obligations by June 5 — four days later than previously thought — if lawmakers didn’t act in time. Raising the country’s debt ceiling, which currently stands at $31 trillion, will allow more borrowing to pay the country’s already incurred bills.

Biden also spoke to congressional Democrat leaders earlier in the day to update the talks. White House officials will brief Democrats in the House of Representatives via video conference on Sunday.

McCarthy has a narrow Republican majority in the House of Representatives, supported by far-right conservatives who may oppose any deal, no matter how inadequate they seek to cut spending. But by compromising with the Democrats to win votes, he risks losing support from his own base, posing a career challenge for the new speaker.

Both sides have pointed out that one of the main obstacles was an attempt by the GOP to increase labor requirements for recipients of food stamps and other federal assistance programs, a long-standing Republican goal that Democrats have vigorously opposed. The White House said the Republican proposals were “cruel and pointless.”

Biden has said the job requirements for Medicaid are unrealistic. Despite objections from ordinary Democrats, he seemed potentially open to negotiating changes to food brands, now known as the Supplemental Nutrition Assistance Program (SNAP).

Americans and the world watched with unease as the risky negotiations threaten to throw the US and global economy into chaos and undermine the world’s confidence in the country’s leadership.

Worried retirees and others were already making contingency plans for missed checks as the next Social Security payments are due next week.

Yellen said that failure to act by the new date would “create great hardship for American families, harm our global leadership position, and raise questions about our ability to defend our national security interests.”

Any agreement would have to be a political compromise in a divided Congress. Many of the far-right Trump-aligned Republicans in Congress have long been skeptical of Treasury Department projections and are urging McCarthy to hang on.

Memorial Day weekend lawmakers are not expected to return to work until Tuesday at the earliest, and McCarthy has promised lawmakers he will abide by the rule of posting every bill 72 hours before the vote.

Associated Press writers Stephen Groves, Fatima Hussein, Farnoush Amiri, Seung Min Kim, and video journalist Rick Gentilo contributed to this report.

Copyright 2023 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.