President Biden and Speaker of the House of Representatives Kevin McCarthy

an agreement in principle is reached a deal is closed

to raise and lower the federal government’s borrowing limit

federal

expenditure

McCarthy said Saturday

end a months-long stalemate that

has

brought the government to the brink of default on its credit for the first time

ever

.

The deal still has to pass Congress. Its failure could upend the global financial system, shock markets from Tokyo to London, jeopardize Medicare and Social Security payments, and cast doubt on the United States’ role as the world’s most reliable economy.

McCarthy (R-Bakersfield)

said that hey

and Biden

had

agreed to a two-year increase on the

$31.4 trillion

debt ceiling

,

extending the country’s borrowing limit beyond the 2024 presidential election. The White House said it would accept

temporarily for two years

spending caps on non-discretionary funding, stricter work requirements for social safety net programs, and allowing changes to accelerate energy and gas projects.

Biden and McCarthy will have to sell the compromise to their respective allies in Congress, an uphill battle that included persuasive far-right GOP members who wanted McCarthy to go further in enforcing budget cuts and progressive Democrats who say Biden gave in to right-wing demands.

said McCarthy

that he and Biden had spoken twice

on Saturday and that “we still have a lot of work to do. But I believe this is an agreement in principle worthy of the American people.”

The bill contains “historic austerity and ensuing reforms that will lift people out of poverty and into the labor market”.

The speaker

said.

He said he was expecting

that would be the bill

be written and posted by Sunday, with a house vote on Wednesday.

“I don’t think everyone will be happy at the end of the day,” McCarthy told reporters Thursday while talks were still ongoing. “That’s not how this system works.”

TC QUOTA

House Republicans demanded sweeping spending cuts in exchange for raising the debt ceiling

.

The White House initially insisted that the once perfunctory practice of raising the borrowing limit should be viewed separately from budget discussions, as it allows the government to continue borrowing to pay bills it has already accrued.

In the end, neither side got everything they wanted. But in a rare twist, did the parties’ competing understanding of the facts ultimately help? Their together. AWAITING CONFIRMATION OF THE NEXT 3 GRAFS The linchpin of the compromise apparently involves cutting up to $10 billion from the $80 billion increase in IRS funding approved by Democrats last year as part of the Inflation Reduction Act, Biden’s signature legislation. Republicans protested the increase in the agency’s budget, warning it would mean more audits for middle-class Americans. Democrats have said this is demagoguery, and that they are only improving the archaic bureau’s ability to process returns and go after wealthy tax fraudsters, who withhold hundreds of billions of dollars they owe the government. Democrats dislike the proposed compromise deal cut, arguing it will benefit wealthy people and ultimately increase the deficit, but many prefer it to looming cuts to poor people’s rights or other elements of Bidens agenda, including curbing climate change. And while the cut falls far short of many Republicans’ goals, conservative lawmakers may be able to sell it as a grassroots victory given the prominence of the issue on Fox News and other conservative media outlets. Still one

compromise is a political risk for McCarthy, who secured the presidency in January by empowering right-wing members of the House of Representatives and brokering a deal that would see him impeached as speaker by a single vote. Brokered deal with Biden could avoid unprecedented bankruptcy, but could also cost the California Republican his own

managerial position

.

Several members of the far-right faction of the Republicans have expressed frustration over McCarthy’s watering down of a GOP debt-cutting bill passed in April that included sweeping cuts and reclaimed billions of dollars.

tax authorities

financing

for the tax authorities

and unspent COVID-19 money, and repeated parts of the White House climate agenda.

McCarthy and the White House will need dozens of Democrats to support the bipartisan plan to take over the narrowly divided House. Both the House and the Democratic-controlled Senate must pass a bill by June

5

when the Treasury Department predicts that the government will run out of money to pay its bills.

TK on scheduled floor vote.

A default can lead to economic chaos that may blow over

global

financial markets and devastated millions of Americans. The White House has warned it would distort payments to Social Security beneficiaries, government employees and members of the military.

Bankruptcy would almost certainly plunge the already fragile US economy into recession and irreparably damage the long-term credibility and safety of the US dollar, the reserve currency that anchors the global financial system.

The US has trillions of dollars in outstanding debt, and failure to pay interest on its obligations would shock stock markets and sharply increase the cost of borrowing to fund Washington’s deficit spending, which will ultimately flow through businesses and consumers.

The threat of bankruptcy has left Wall Street on edge and stocks on a downward trend in recent days, but the damage was mitigated by investors’ expectations that even die-hard partisan politics would dare not break the debt ceiling allow. They knew that if there’s a default, there’s no way to hide, says Ryan Sweet, chief US economist at Oxford Economics.

Up and down the income and wealth spectrum, it would be an economic catastrophe, Sweet said.

Credit rating agency Fitch on Wednesday placed the United States’ AAA rating at negative and warned of a potential downgrade if lawmakers fail to approve a deal. The agency said “the runoff of the debt ceiling” posed a threat to the US’s highest credit rating, but expected a resolution before the projected June 5 deadline.

The government narrowly avoided bankruptcy under President Obama in 2011, but Standard & Poor’s downgraded the US credit rating as a result of that fiscal confrontation.

Progressive Democrats have pointed to the 2011 debt crisis as an example of how GOP lawmakers have used the debt ceiling as a means of enforcing policy concessions, noting that Republicans lifted the country’s borrowing limit three times under former President Trump

Without a problem.

Some progressive lawmakers have urged Biden to invoke the 14th Amendment, which states that “the validity of the state debt permitted by law … shall not be called into question.”

Biden has said he believes he has the authority to use the amendment to bypass Congress and get more debt issued, but acknowledged that would be challenged in court.

Earlier this month, the president canceled a high-profile trip to Australia and Papua New Guinea following Japan’s Group of 7 summit

recurring

to Washington

early

to meet McCarthy. The two men made no immediate progress, and negotiators continued to haggle over the Memorial Day weekend, telling congressmen to be ready to return to Washington to vote on a bipartisan bill.

for the

deadline.

“The American people deserve to know that their Social Security benefits will be there, that veterans’ hospitals will remain open, and that economic progress will be made and will continue to be made,” Biden said Thursday at a Rose Garden ceremony to honor Gen. .

Karel

Q Brown

Jr

as its next Chairman of the Joint Chiefs of Staff.

“Default puts all of that at risk

,” he said. “

Congressional leaders understand that, and they all agree: there will be no standard.”