According to media reports, Democrats and Republicans in the US are about to reach a compromise in the dispute over the debt limit. This could avert an insolvency of the US government – and a global financial crisis.
In the dispute over the raising of the US debt limit, an agreement appears to be coming soon. Democratic and Republican negotiators have begun drafting legislation. This is reported by the news agency Reuters and the “New York Times” and refers to negotiation circles. However, some details are still open.
According to the reports, the debt ceiling is to be raised from the current $31.4 trillion for two years – i.e. until after the presidential election in November 2024. In return, government spending on everything except the military and veterans is to be cut during this period.
Austerity measures in return for an increase
For weeks, Democrats and Republicans have been trying to find a compromise in tough rounds of negotiations on raising the debt limit. US President Joe Biden’s Democrats need the support of Republicans, who hold a majority in the House of Representatives. In return, they want to implement savings, for example in the social sector. The Democrats argue that the money will not fund new spending – it will serve to meet commitments already made.
Both Biden and Republican House Speaker Kevin McCarthy yesterday expressed optimism that the gap between positions will eventually be bridged. The White House said talks with Republicans had been productive. But there are still serious disagreements, the President is fighting for his priorities. Biden stressed that he had made an offer to cut government spending. Now it needs a non-partisan agreement with the Republicans. It’s about competing versions of America, according to Biden. “I believe we will come to an agreement that will allow us to move forward and protect the hard working Americans of this country.”
McCarthy also said it wasn’t easy – but they were working on a solution. Every hour counts in discussions with President Biden’s team. “We’ve been talking to the White House all day,” McCarthy said. “We’re working hard to make it work.”
At default threatened financial crisis
In the United States, Parliament decides the maximum amount of money the state can borrow. An agreement must pass both the Republican-dominated House of Representatives and the Democratic-controlled Senate to take effect.
According to forecasts by the US Treasury Department, a historically unprecedented insolvency of the government is imminent from the beginning of June. This would damage confidence in the creditworthiness of the world’s largest economy and could lead to a global financial and economic crisis. In the US alone, it is feared that millions of people could lose their jobs.
With information from Ralf Borchard, ARD Studio Washington.