Biden and McCarthy signal that debt limit agreement will be approved

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US President Joe Biden and US House Speaker Kevin McCarthy expressed confidence that the interim agreement to raise the debt ceiling would be approved by Congress and reach to the president’s desk for his signature, avoiding a historic debt default.

“I think we’re in good shape,” Biden told reporters at the White House on Sunday, before beginning a call with McCarthy to “make sure that all the ‘you‘ intersect and the ‘is‘ are dotted”.

Biden and McCarthy closed their I wake up during a 90 minute phone call on Saturday nightpaving the way for a deal, despite the objections of hardliners on both sides, before the US government runs out of borrowing capacity in about a week.

McCarthy said Sunday that he expected a majority of Republicans to vote in favor of the negotiated bill, defending it as a “transformational” measure to rein in federal spending, even though “it may not do everything for everyone.”

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Biden said he doesn’t anticipate any sticking points that could derail the deal. Asked if he was confident the deal would reach his desk, he said: “Yes.”

Initial support for centrism came from Rep. Steny Hoyer, an influential Democrat who backed the deal despite citing “setbacks” it contains for his party’s agenda.

“That is why I urge my colleagues to join me in supporting this compromise legislation and ending this unnecessary economic turmoil,” he said in a statement on Sunday.

McCarthy urged lawmakers to reserve judgment until they see the legislative text of the bill, which is expected to be released on Sunday, giving representatives the promised 72 hours to read it before voting on Wednesday. Negotiators for both sides plan to brief their members on the agreement in separate calls later in the day.

McCarthy dismissed as “crazy” a scenario in which the House fails to pass the measure, stating that 95% of lawmakers from his party are “excited” about the deal. He acknowledged that the deal is likely to face some opposition from Republicans.

“We know that any time we sit down and negotiate with two parties, we have to work both sides of the aisle. So it’s not 100% what everyone wants, but when you look at it, the country will get stronger,” McCarthy told reporters at the US Capitol on Sunday morning.

Asked if he was concerned about a possible attempt by hardline Conservative lawmakers to oust him from the speaker’s chair, McCarthy replied: “Not at all.”

But Rep. Jim Clyburn, a South Carolina Democrat and longtime Biden ally, took a more pragmatic tone in a phone interview Sunday.

“The easy thing, in my opinion, is to reach an agreement. The difficult thing comes now, which is to reach 218 votes in the House and 51 votes in the Senate,” Clyburn said.

Discussing the merits of the deal, McCarthy cited provisions reversing previously approved spending, calling it “the biggest break in American history.” He also highlighted the increase in labor demands.

The agreement reduces the budget of the internal revenue service at $1.9 billion, he said, less than the $80 billion cut in funding from the IRS, that many GOP lawmakers were looking for.

While the deal doesn’t affect the Biden administration’s student loan forgiveness, which is being litigated in court, it would end the pandemic-era payment moratorium. “The hiatus ended 60 days after signing,” McCarthy told the “fox news sunday”.

Garrett Graves, one of the Republican negotiators, said the deal would also expedite permitting for energy projects, though a full overhaul of the 54-year-old National Environmental Policy Act would be handled separately.

Debt Limit Agreement: Adjusted Timing

The bill creates a discretionary cap of $1.64 trillion for fiscal year 2024, a $60 billion cut from the current spending level of $1.7 trillion, according to a White House bulletin.

This includes a 3% increase in defense, from $858 billion to $886 billion, and a 12% cut in domestic programs, from $722 billion to $637 billion. The White House said there are accounting movements that could, in the next appropriations bill, erase that cut.

There is little room for error or delay. TO Treasury Secretary Janet Yellen warned on Friday that the borrowing limit must be extended until June 5 to avoid a historic default.

© 2023 Bloomberg L.P.

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