The debt showdown is not over yet

US President Joe Biden and House Speaker Kevin McCarthy have reached an agreement today to raise the US debt ceiling, which currently stands at $31.4 trillion. It is high time, as the US would face insolvency on June 5 without an agreement. However, the package has not yet been passed by the chambers of Congress.

A certain level of optimism was already spreading ahead of the vote on the agreement package scheduled for today. This is being fueled, among other things, by the statement made by Democratic leader Hakeem Jeffries. He has assured that his party will provide enough votes for the deal to go through. McCarthy also spoke positively about the package, calling it an “agreement worthy of the American people.” He therefore expects most Republicans to approve it on Wednesday.

The fact that there are also critical voices can be seen, among other things, in a statement by Jeffries on Twitter: “There are extremists in Washington determined to crash the economy. And then they blame President Biden for the damage they cause.” This statement likely refers to former President Donald Trump, who had called for the compromise to be blocked. He argued that US insolvency would be easier to bear than “a bad deal.” However, even less radical Republicans are criticizing the package because they feel the budget cuts do not go far enough. Texan Chip Roy described it as a “turd sandwich,” implying a piece of bottomless impudence wrapped in flimsy compromises. Criticism is also coming from the Democratic camp, specifically regarding the significantly reduced social benefits in the package.

Meanwhile, the markets are showing optimism. As early as Friday, investors priced in the deal as a foregone conclusion, resulting in rising prices. Whether their optimism is justified remains to be seen.