US President Joe Biden and House Speaker Kevin McCarthy reached an agreement on a deal to raise the country’s debt ceiling, but the measure could face procedural hurdles, complicating the race to avoid an unprecedented default.
The first test of legislation comes on Tuesday when the bill goes before the House Laws Committee (made up of nine Republicans and four Democrats) that serves as the guardian of the upcoming legislation on the House floor.
That means bipartisan support will be needed to win congressional approval before the government is expected to default on June 5.
The debt ceiling agreement will suspend the borrowing limit for two years and limit government spending during that period. That would cut spending on Democrats’ favorable domestic priorities while increasing military spending by about 3 percent. Food assistance will also be expanded for some beneficiaries to get them to find jobs, and environmental reviews of energy projects will be accelerated.
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Over the weekend, White House officials polled Democrats on Capitol Hill to brief them on the agreement, while McCarthy touted the bill to conservatives as a beneficial spending overhaul.
Biden told reporters on Monday: “I feel good about it.” “There’s no reason why not” to avoid default, he added.
In both chambers (Senate and House of Representatives), outspoken opponents of the bill can slow its passage. Some conservatives in both chambers said they would oppose the deal because it doesn’t go far enough to limit federal spending, while some progressives see spending restrictions as too severe.
McCarthy, too, was confident during his remarks at the Capitol: “At the end of the day, people can work together to be able to get through this.”
McCarthy told reporters at the Capitol on Sunday that the agreement “doesn’t get everything everyone wants,” but that was expected in a divided government. While in the back corridors, he told lawmakers in a conference call that Democrats “got nothing,” CNBC reported.
But McCarthy has only a slim Republican majority in the House of Representatives, and hard-right conservatives may resist any deal as insufficient as they try to cut spending. By compromising with the Democrats, he risks losing support of his members, setting up a difficult moment in the career of the new speaker.
Indeed, two conservative Republicans on the committee, Rep. Chip Roy of Texas and Ralph Norman of South Carolina have said they oppose the deal.
On the flip side, a group of 100-strong moderates in the new Democratic coalition gave a decisive gesture of support, saying in a statement that it was confident that Biden and his team had “provided a viable bipartisan solution to end this crisis” and were working to ensure that the agreement received support from both sides.
Treasury Secretary Janet Yellen said the government could run out of money it needs to pay its bills on time on June 5 unless Congress takes action. While the U.S. failure to pay its bills on time could have wide-ranging consequences, having an agreement likely mitigates the damage to Congress due to the lack of a deadline.
In the United States, a default could freeze financial markets and trigger an international financial crisis. Analysts say millions of jobs will disappear, borrowing and unemployment will rise, and a stock market slump could wipe out trillions of dollars of household wealth. That would shatter the $24 trillion Treasury debt market.
The agreement came after Yellen told Congress that the United States could default on its debt obligations by June 5 — four days later than previously expected — if lawmakers do not act in time.
Raising the country’s debt limit, which now stands at $34.38 trillion, allows more borrowing to pay insured bills.
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