A New US Debt Deal Would Increase The Limit & Cap Spending For 2 Years

As the government is running out of time to make a decision regarding the concerns of the debt ceiling and cap federal spending, serious discussions are ongoing for the past few days regarding the subject.

From the latest update, it is being said that both parties are moving towards a decision to raise the debt limit and cap federal spending of the government for two years.

Sources close to the inner circles of the leaders and other people who are familiar with the matter also share the same kind of view regarding the matter as time is closing in for the government to avert a possible, catastrophic U.S. default.       

President Joe Biden and House of Representatives speaker Kevin McCarthy had been meeting up for the past few days in order to address the issue and people who are familiar with the details of the meeting say that the two parties have narrowed down their talks in order to find a solution soon to overcome the issue.

They also mentioned that the decisions that are taken are tentative and a final decision regarding the subject is yet to be taken. The decision regarding the amount of the cap is also yet to be decided by both parties. 

House Of Representatives Speaker Kevin McCarthy

One thing that is clear or is said to have been decided is regarding the defense spending on the country. It is said that the decision to a 3% rise in defense spending of the country was taken in line with President Joe Biden’s budget request.

People who are familiar with the deal also stated that the deal will also include necessary provisions to upgrade the electric grid of the nation with an aim at renewable energy along with speeding permits for pipelines and other fossil fuel projects that are backed by the GOP. 

Another possible effect of the upcoming deal is said to be the $10 million cut from the $80 billion budget increase for the Internal Revenue Services. The budget increase was a result of the Inflation Reduction Act.

As the government is running short on time to make decisions regarding the debt ceiling, it is believed that the deal which is put forward by the Republicans will be much more limited than their initial; offer.

As the discussions and news regarding the deal make headlines, an advisor to the House of Democratic leadership made it clear that the White House has made no final decisions regarding sounding caps of IRS funding. 

After the discussions regarding the topic, House of Representatives speaker Kevin McCarthy met the media at the capitol and stated that both parties were well aware of the differences and where they lie.

He also added that he is planning to work through the holiday weekend there. McCarthy also stressed the fact that no final decision has been made regarding the issue and also mentioned that it was a hard job and that they will continue to work on it until a suitable and acceptable decision for both parties is taken. 

Jan Hatzius and Alec Philip of Goldman Sachs gave a note to its investor in light of the recent events regarding the discussions on the debt ceiling and cap spending.

In the note, it was said that the chances are high that the leaders of the parties will arrive at a decision, most probably by Friday. The note described that the negotiators were closing in on an argument. 

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Gathering more from the available update and considering the opinions from experts, Tuesday will most likely be the day when the House votes if a deal is made soon.

After the voting is done, the Senate will have to act quickly in order to get it to President Joe Biden’s desk in order to get it signed by the President. Following the statement from the Treasury Secretary, June 1 is expected to be the deadline for the government to act on the issue.

Treasury Secretary Janet Yellen had stated earlier that her department could run out of cash by June 1. If such a situation ever arrives the following day will mark several catastrophic events including the failure of payments to millions of beneficiaries of Social Security.

Garret Graves, the representative from Louisiana, who is one of the negotiators for the issue described the whole process as ‘slow’ in one of his statements made on Thursday night.

In his statement, Graves also mentioned that the White House was very stern in refusing the demand by the Republicans to include work requirements as one of the eligibility criteria for different social welfare programs including Medicaid.

Graves also said that along with this, there were different other hang-ups that the negotiators faced but this was one of the bigger issues that was discussed. 

As the discussion to arrive at an acceptable solution continues among the leaders, leading economists suggest that even though a deal will help the government to overcome a possible default, chances are high that the caps of government outlays could easily tip the country into a possible recession.

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