US President Biden, House Speaker McCarthy agree on tentative debt ceiling deal but the default still looms

On Saturday, US President Joe Biden and top congressional Republican Kevin McCarthy reached a tentative deal to raise the federal government's $31.4 trillion debt ceiling through January 2025, two sources familiar with the negotiations said, reported Reuters.

The details of the deal state that it would suspend the debt limit through January of 2025, while capping spending in the 2024 and 2025 budgets, claw back unused COVID funds, speed up the permitting process for some energy projects and includes some extra work requirements for food aid programs for poor Americans.

That said, some of the Republicans and Democrats aren’t happy with the much-awaited announcements due to the compromise each party had to do to reach the agreement. The same push Reuters to mention that the deal still faces a difficult path to pass through Congress before the government runs out of money to pay its debts in early June.

It should be noted that the debt ceiling deal needs to pass through the House on Wednesday and the Senate by June 05 to avoid the looming ‘catastrophic’ default.

“While an end to uncertainty would be welcome, the relief that may come from a deal may be a short-lived sugar high for investors. That's because once a deal is reached, the U.S. Treasury is expected to quickly refill its empty coffers with bond issuance, sucking out hundreds of billions of dollars of cash from the market,” said Reuters.

In this regard, US House Speaker Kevin McCarthy predicted on Sunday, per Reuters, that a majority of his fellow Republicans would support the deal.

On the other hand, Democratic President Biden said he was confident the legislation would pass both chambers of Congress to avoid a US government default. Asked if there were any sticking points, the president replied: ‘None,’ per Reuters.

US President Joe Biden to deliver remarks on budget agreement at 6:25 PM (10:25 GMT) said the White House on early Sunday in Asia while adding “US President Biden spoke with speaker MccCrthy on debt limit.”