US debt ceiling: Deal in principle reached by Joe Biden and Kevin McCarthy

Compromise between Democrats and Republicans would prevent ‘catastrophic default’ but still needs approval

US president Joe Biden strongly urged both houses of the US Congress to pass the debt ceiling agreement. Photograph: Susan Walsh/AP

A deal reached in principle to avert a potential US debt default should attract support from a majority of Republicans, the speaker of the House of Representatives Kevin McCarthy has suggested.

Mr McCarthy and US president Joe Biden agreed a tentative deal on Saturday to raise the amount the US government can borrow in return for reducing and capping some federal spending as well as introducing other reforms.

However, the deal has been strongly criticised by hard right Republicans while some progressives in Mr Biden’s Democratic party are also unhappy with its concessions.

US president Joe Biden and Speaker of the House of Rep Kevin McCarthy reached a tentative deal to raise the federal government's $31.4 trillion debt ceiling. (Reuters)

Mr McCarthy said on Sunday that he expected the deal he reached with the president would attract support from a majority of Republicans in the House of Representatives.


He told Fox News that more than 95 per cent of House Republicans were very excited about the agreement and it included measures that would prevent future legislation from pushing up the US deficit.

Mr Biden on Saturday night described the agreement as a “compromise” and urged members of the US Congress to back it.

Democrats in Congress were due to be briefed in full on the deal on Sunday night by the White House. However, on Sunday morning Pramila Jayapal, chairwoman of the House of Representatives progressive caucus, suggested her group was yet to decide whether to support the agreement. She said she was waiting to see the full text of the proposed agreement.

Analysis: Threat of a US debt default eased but has not disappeared entirelyOpens in new window ]

The deal to raise the limit on the amount the US government can borrow – known as the debt ceiling – was agreed on Saturday night in Washington following a 90-minute phone call between the president and Mr McCarthy after days of negotiations between their representatives.

Treasury secretary Janet Yellen had warned on Friday that the US government could run out of money to pay its bills by June 5th unless the limit was raised.

Such a move would have led to a US default which the White House had argued would lead to economic turmoil in the US and around the world.

The proposed agreement has to be backed by both the House of Representatives and the US senate.

Mr Biden said the agreement was “good news for the American people, because it prevents what could have been a catastrophic default and would have led to an economic recession, retirement accounts devastated, and millions of jobs lost”.

Mr Biden said the deal reduced government spending while “protecting critical programmes for working people and growing the economy for everyone”.

US house speaker Kevin McCarthy leaves the Capitol in Washington, DC, after announcing that a tentative agreement was reached with US president Joe Biden to raise the US debt ceiling limit. Photograph: Will Olive/EPA-EFE

He said it protected the key priorities and legislative accomplishments of the White House and Democrats in the US Congress.

Mr McCarthy on Saturday night said the deal would see “historic reductions in spending” while there would be no new taxes or new government programmes and would also include reforms to “lift people out of poverty”.

However Republican representative Bob Good, a member of the conservative House Freedom Caucus, tweeted that he was “hearing” the deal would raise the US debt by $4 trillion. He maintained if that was true “I don’t need to hear anything else”.

“No one claiming to be a conservative could justify a ‘Yes’ vote,” he said.

Central to the proposed package is a two-year budget deal that would hold spending flat for 2024 and increase it by one per cent for 2025 in exchange for raising the debt limit for two years.

Military spending will increase at a higher rate.

The agreement is also expected to raise the age for existing work requirements for able-bodied adults without children to access some social programmes from 49 to 54.

However, there would be waivers for military veterans and the homeless.

Martin Wall

Martin Wall

Martin Wall is the former Washington Correspondent of The Irish Times. He was previously industry correspondent