August 9, 2023
US President Joe Biden and Kevin McCarthy, the Speaker of the Republican House of Representatives, have agreed today to raise the US debt ceiling, which currently stands at $31.4 trillion. The timing is critical, as without an agreement, the US would face default on June 5th. However, the package has not yet been approved by the congressional chamber.
A certain level of optimism had already emerged before the scheduled vote on the agreement package for today. This optimism has been fueled, among other things, by the statement of Democratic leader Hakeem Jeffries. He assured that his party would provide enough votes to support the deal. McCarthy also expressed positivity about the package, referring to it as an “agreement worthy of the American people.” He therefore expected that most Republicans would vote in favor on Wednesday.
However, critical voices can also be heard, as evidenced by a statement from 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 called for blocking the compromise. He argued that the US default would be more manageable than “a bad deal.” Even less radical Republicans criticize the package for not making deep enough cuts to the budget. Texan Chip Roy referred to it as a “turd sandwich,” implying that it’s an audacious proposal concealed by flimsy compromises. Criticism also arises from the Democratic side, particularly concerning the significantly reduced social benefits in the package.
Meanwhile, the markets remain optimistic. Investors had already factored in the deal as a done deal on Friday, leading to rising stock prices. Whether their optimism is justified remains to be seen.