Biden and Republicans Reach Agreement on Debt Ceiling, Averting Economic Crisis

Biden and Republicans Reach Agreement on Debt Ceiling, Averting Economic Crisis

Ira Singh
28 May’23

Amid truce between Democrats and Republicans over debt ceiling , the imminent crisis seems to have averted.However, the uncertainty continues to loom large over the issue.The debt ceiling crisis in the United States would have impacted globally including Indian economy.

In a significant development for the US economy, President Joe Biden and Republican lawmakers have successfully reached an agreement on the contentious issue of the debt ceiling, avoiding a potential economic crisis. The agreement comes after weeks of intense negotiations and represents a significant display of bipartisanship in a divided political landscape.

Under the terms of the agreement, the federal government’s $31.4 trillion debt ceiling will be raised to accommodate the government’s borrowing needs for the foreseeable future, according to sources. The deal also includes provisions for a bipartisan commission that will examine and propose measures to address long-term fiscal challenges facing the country, such as reducing the deficit and ensuring the sustainability of social programs.

What we know about a deal so far:
●President Joe Biden, House Speaker Kevin McCarthy and their negotiators have reached a tentative agreement to raise federal government’s $31.4 trillion debt ceiling, ending a months long stalemate.

●According to reliable source,it includes a two-year appropriations deal and a two-year debt limit extension, effectively resolving the issue until after the 2024 election. It’ll include work requirements for federal aid like SNAP for Americans up to 54, with exceptions for homeless people and veterans.

●According to official reports;negotiators have agreed to cap non-defense discretionary spending at 2023 levels for one year and increase it by 1% in 2025.

●Republicans had demanded that any deal must cut federal spending, according to sources.

●The deal still has to be converted into legislative language and pass both the Republican-led House and Democratic-controlled Senate.

President Joe Biden’s address to the Nation
President Biden expressed his satisfaction with the agreement, stating, “This is a significant moment for our country. By reaching across the aisle and finding common ground, we have demonstrated that we can put the interests of the American people first and work together for the greater good.”

Top Congressional Republican lawmakers’ concern
Republican lawmakers, who had expressed concerns about the growing national debt, emphasized the importance of fiscal responsibility while acknowledging the necessity of raising the debt ceiling to avoid a potentially catastrophic economic situation.

Impact of Non-agreement of the deal in the Global economy incl,India
The debt ceiling is a statutory limit on the amount of money that the United States government can borrow to fund its operations. Failure to raise the debt ceiling would have had severe consequences, including the potential for a government shutdown, a downgrade of the nation’s credit rating, and a disruption in essential services.

The recent agreement reached between President Joe Biden and Republican lawmakers on the US debt ceiling issue has averted a potential economic crisis not only for the United States but also for the global economy.Had Democrats and Republicans failed to reach an agreement the impact on the Indian economy,as one of the world’s major emerging markets, would have been significant.

Moreover,a potential downgrade of the United States’ credit rating would have created a ripple effect in global financial markets, leading to increased borrowing costs for countries like India.The Indian government,in particular, heavily relies on foreign borrowing,and higher interest rates would have strained its fiscal position and made it more challenging to fund critical infrastructure projects and social programs.

Additionally, the successful resolution of the US debt ceiling provides a much needed respite for the Indian economy, which has been recovering from the impacts of the COVID-19 pandemic.It offers Indian businesses and investors a sense of certainly and reduces the likelihood of adverse shocks to the financial system.

Experts’ Opinion
The news of this agreement has been welcomed by economists and financial markets alike. The resolution of the debt ceiling issue brings a sense of stability and certainty to the economy, allowing businesses and investors to make informed decisions and avoid unnecessary risks.

‘Stability & Prosperity’ of economies around the world’ ..
While the immediate crisis has been averted, both Democrats and Republicans recognize the need for a comprehensive approach to address the nation’s long-term fiscal challenges. The bipartisan commission established as part of the agreement will play a crucial role in developing sustainable solutions to ensure the economic well-being of future generations.

The successful resolution of the debt ceiling issue represents a significant achievement for the Biden administration and a positive signal for the country’s political climate.

As the Indian economy continues its path to recovery, the hope is that the bipartisan agreement on the US debt ceiling serves as a reminder of the significance of collaboration and responsible governance,not only for the benefit of the American people but also for the stability and prosperity of economies around the world.