US President and Speaker of House of Representatives reach agreement in principle on debt ceiling

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Link Securities | US President Joe Biden and House Speaker Kevin McCarthy, a Republican, reached an agreement in principle this weekend to raise the country’s debt ceiling. The agreement is very much in line with press reports last Friday. The debt ceiling is suspended until 2025. Non-defence discretionary spending will remain more or less flat next year and rise 1% in 2025, before the limits are eliminated in 2026. Defense and veterans spending will increase in line with Biden’s budget request. About $29 billion of unused Covid-19 aid will be rescinded and there will be a $20 billion cut in Treasury funding for tax collection enhancement.

In addition, age-related work requirements for applying for food assistance and family benefit programs will increase, but no additional requirements will be required for Medicaid. The new rules will relax permitting for energy projects, but tax incentives for clean energy will be maintained.

McCarthy said the plan will be voted on in the House next Wednesday, but the bill needs support from Democrats and Republicans in both chambers after more left-leaning and conservative lawmakers voiced opposition to it. Parliamentarians have a week to pass the bill, after US Treasury Secretary Janet Yellen updated her estimate of the debt ceiling deadline to June 5. However, the bill is expected to have enough votes to pass.

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