Biden at Minefield
According to Iran Gate, after days of negotiation and meetings, Biden and the Republicans were finally able to reach an agreement on the debt ceiling and thus prevent a default. Biden had announced in the past few days that he is open to negotiations and the possibility of reaching an agreement to resolve the debt crisis is very close.
On Saturday afternoon, after intense negotiations, it was finally agreed that the debt ceiling would be suspended for two years in exchange for a halt or reduction in expenses. Now we have to wait for the outcome of the vote in Congress. The agreement on the US debt ceiling was accepted to prevent default and control public spending.
The debt ceiling determines the maximum amount of money that the US federal government can borrow through issuing and selling government bonds. If the government fails to increase this ceiling, it will default and will not be able to pay its employees’ salaries, as well as social security expenses.
President Joe Biden and the Republican opposition, who currently control the House of Representatives, reached a compromise late Saturday afternoon, suspending the debt ceiling for two years.
This agreement was reached after a grueling and tense marathon. Janet Yellen, the US Treasury Secretary, had warned in her latest estimate that a historic crisis is looming and without appropriate action on the debt ceiling and failure to reach a family agreement, American households will face severe problems. It will also inflict a major blow to America’s global leadership position and raise questions and doubts about America’s ability to defend its national interests.
During this period when we were all waiting for the results of negotiations to find a solution to this crisis, financial markets showed signs of increasing turmoil as the June 5th deadline approached. In 2011, the mere risk of a default caused a downgrade in the credit rating of the United States and a 20% drop in the stock market.
Biden takes an important step
In a White House statement, Biden referred to the agreement with Kevin McCarthy, the House Minority Leader, as a crucial step that will lead to cost reduction while also supporting important and vital programs for worker protection and economic growth.
He added that this agreement is good news for the American people because the federal government’s inability to pay its debts could have catastrophic consequences and lead to an economic recession.
Biden emphasized that this agreement is not in conflict with his and the Democrats’ main priorities. The President requested the House of Representatives and the Senate to approve this agreement without delay.
McCarthy’s cost reduction
Kevin McCarthy confirmed in a press conference in the United States Capitol that this agreement includes a historic reduction in costs and subsequent reforms that will lift people out of poverty and reduce excessive government intervention. He stressed that no new taxes are planned to increase tax revenues.
The assumption of Biden and McCarthy is that this agreement can be considered a suitable and reasonable achievement, even if some representatives from both parties do not agree with all aspects of it. It is expected that Republicans and Democrats will unite to approve this agreement.
The House of Representatives is a place where voting and approval of this plan seems somewhat uncertain, and they must announce their opinion this week. In recent days, opposing voices of compromise and reconciliation have been heard from both hardline Republican representatives who demand a significant reduction in expenses, and from Democrats who reject the austerity plan in social expenses.
Debt ceiling suspension
As mentioned, this agreement suspends the maximum government debt ceiling, which is currently set at $314 trillion and has now reached this amount, for a two-year period until after the scheduled date for the 2024 US presidential elections. This is done to prevent further crises during election campaigns and to prevent tampering with the voting funds. Instead, it blocks federal spending and effectively prevents its increase, and in some cases reduces it, except for defense appropriations.
According to an analysis by The New York Times, the impact of the fundamental measures included in the agreement over a period of ten years could lead to a reduction in expenses equivalent to $650 billion, which is not considered a particularly significant result.
From what has been achieved so far, it can be inferred that this agreement anticipates actions such as new job requirements and the imposition of time constraints on certain social support programs, such as food coupons.
Additionally, some unspent COVID-19 relief budgets will be canceled, and ultimately, it is expected that the issuance of environmental permits for energy projects will be expedited and simplified. More details of the agreement are expected to be presented in the coming days, and it is possible that the full text will also be published.
In conclusion, if an agreement is not reached, considering the 2024 elections, it could be seen as political suicide for both conservatives and democrats.
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