Biden and Republican leaders reach ‘tentative’ deal on debt ceiling

US President Joe Biden and House Republican Speaker Kevin McCarthy reached a “tentative” agreement on raising the country’s debt ceiling and limiting government spending after a lengthy phone call on Saturday night. However, the bill must be finalized and passed by Congress before the government runs out of money to pay its bills.

“I believe this is a fundamental agreement worthy of the American people. It includes historic spending cuts, sweeping reforms that will lift people out of poverty into the workplace and curb government excesses,” McCarthy told reporters.

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“The agreement represents a compromise, which means not everyone gets what they want,” Biden said in a statement. “It’s an important step forward that reduces spending while protecting vital programs for working people and growing the economy for all.”

The House Speaker said the bill contained “a lot more” but “we still have a lot of work to do”. He refuses to answer questions until he has informed his fellow party members about the progress. A conference call for all Republican MPs on the progress of the negotiations is planned for later on Saturday.

Biden and McCarthy called each other twice on Saturday, with one call lasting over 90 minutes, to negotiate a compromise. During these “extended talks,” the “framework agreement” was agreed, but the exact wording has yet to be finalized as both Republicans and Democrats object to the compromise, the report said Bloomberg citing people familiar with the talks.

McCarthy has promised to publish the text of the law on Sunday and hopes to vote on it on Wednesday – just days before the government is expected to run out of money.

US Treasury Secretary Janet Yellen initially warned her department could run out of funds on June 1, but said on Friday it will likely be able to meet its commitments by June 5. Economists have warned that if an agreement is not reached in time and the US fails to settle even part of its bills, it could trigger a market collapse and damage longer-term confidence in the dollar.

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The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, criticized the impasse on the debt ceiling in Washington and stated that a US default would have a major impact on economic prosperity around the world.

“The US Treasury market is the anchor of stability for the global financial system,” Georgieva said at a news conference Friday following the IMF’s Article IV consultation with US business officials. “When you pull the anchor, the world economy – the ship we all travel on – finds itself in choppy and, worse, uncharted waters.”

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