After marathon negotiations, the US can breathe: with votes in Congress, a bill suspends the debt limit until 2025 and the risk of a default by the federal state is averted.
«A great victory for our economy and for the American people» was seen by President Joe Biden.
According to the US Treasury, the world's largest economy had until Monday 5 June to avoid default.
Like all the world's major economies, or nearly so, the US lives on credit. But unlike what is true in other developed countries, America regularly faces a legal complication: the debt ceiling, the maximum limit to which government borrowing can go, must be raised or suspended by Congress.
Tough negotiation
Although for decades it was only a formal parliamentary procedure, this year the Republicans, who now control the House of Representatives, in particular their leader Kevin McCarthy, have turned it into a tool for exerting political pressure on Democratic President Biden.
A series of meetings in the White House, endless negotiations of advisors... Washington was hanging for weeks on the lips of those who decided the fate of the famous debt ceiling.
Although it is very common for last-minute deals to be struck on US fiscal matters, the tough negotiations have forced Fitch Ratings, one of the so-called «big three» rating agencies, to put the US Treasury's credit rating, which it places at AAA, the highest rating, «on watch».
Finally on Saturday night, in the midst of the Memorial Day weekend, the parties reached an agreement in principle. The text allowed for the worst-case scenario to be avoided, namely the scenario of the country declaring a default, unable to pay its creditors, salaries and pensions. An unprecedented situation that would lead the US and global economy into uncharted waters.
To avoid this potentially disastrous development, President Joe Biden and House Speaker Kevin McCarthy reached a compromise.
The agreement was approved by a large majority in the House of Representatives (314-117) the day before yesterday (Wednesday) and by the Senate (63-36) yesterday (Thursday). It now remains for President Biden to ratify it by signing the bill. The head of state, a candidate for re-election in 2024, has said he is «anxious» to do so.
He is expected to do so tonight by addressing a speech to the Americans to outline the text in broad terms.
In particular, the agreement will allow the suspension for two years, until 1 January 2025, i.e. the period after the November 2024 presidential elections, of the maximum borrowing limit of the US Treasury (31.4 trillion dollars).
In return, the Democrats agreed to cut spending in several categories, except for the armed forces and veterans, but not as much as the Republicans would like to see.
«Much more to be done»
That is why several of their cadres opposed the bill, both in the House of Representatives and in the Senate.
«Make no mistake, there is still a lot to be done» to clean up the US budget, said Senate Republican baron Mitch McConnell.
The left wing of the Democrats, on the other hand, was stirred up by the changes in some of the conditions for the granting of welfare benefits, especially food aid.
The influential senator Bernie Sanders said that his «conscience» does not allow him «to vote for a bill that hurts workers».
