The debt ceiling determines how much the US federal government can borrow. Without adjusting that limit, the US Treasury would be empty on Monday, so that benefits can no longer be paid, nor interest on government debt. The latter would most likely lead to major chaos in the financial markets.
Biden already reached an agreement last Saturday with Kevin McCarthy, the Republican speaker of the House of Representatives, on the debt ceiling. The deal is still awaiting approval by the US Congress. The conservative Republican side wanted more austerity. With approval from the Senate and House of Representatives, a next vote on raising the debt ceiling won’t be scheduled until after the 2024 presidential election.
Formality
Raising the roof in the United States is often a formality. But growing tensions between Republicans and Democrats aren’t making budget deals any easier. For the credit rating agency Fitch, it is cause for sadness for the financial health of the United States. The rating agency may soon have to downgrade the US government’s credit rating. Now the United States still has the highest score. A lower score means that lending money to the United States is seen as riskier, meaning Americans may have to spend more on interest rates.
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According to Biden, the agreement will reduce public debt and, at the same time, reduce public spending. “The only way American democracy can work is through compromise and consensus,” the president said. In his speech he therefore also discussed the cooperation between Republicans and Democrats, which made it possible to conclude the deal. “Both sides acted in good faith and kept their word.”
Unity and peace
Biden also praised McCarthy, among others. “Our teams got along and got things done. We were completely honest and respectful of each other. Without unity there is no peace, only bitterness and anger. And we don’t want to become such a country. I can honestly tell you that I have never been more optimistic about America’s future. We just have to remember who we are. We are the United States of America. There’s nothing we can’t do.’
Generally, the presidents of the United States reserve a speech from the Oval Office for the most important and dramatic events such as the attacks of September 11, 2001 or the explosion of the Space Shuttle Challenger.