US President Joe Biden reaches deal on US debt ceiling

US President Joe Biden and top Republicans have struck a deal to raise the $48-trillion debt ceiling, ending a months-long stalemate.

Republican leader Kevin McCarthy confirmed a deal in principle has been struck with US President Joe Biden on raising the US debt ceiling and said he expects Congress to vote this week. Mr McCarthy said he would talk again with Mr Biden over the coming hours and oversee final wording of the bill, adding that the House of Representatives will be “voting on it on Wednesday. (local time).

IUS President Joe Biden speaks during a meeting on the debt ceiling with US House Speaker Kevin McCarthy last week. Picture: AFP

Joe Biden with US House Speaker Kevin McCarthy in the Oval Office. Picture: AFP

The US government is expecting to hit its borrowing limit on June 5, raising the possibility of the world’s largest economy failing to honour its repayment obligations for the first time and igniting a firestorm in global markets.

Party leaders now face a race against time to muscle the agreement through Congress, with hard-right Republicans and Democratic progressives both crying foul over concessions made to seal the deal.

The culmination of weeks of tense, high-stakes negotiations in Congress and the White House, the accord would permit the government to add to its $31 trillion-plus debt, avoiding a downgraded credit rating, likely recession and potentially millions of job losses.

And it goes some way towards appeasing fiscal hawks in the House of Representatives who have demanded significant rollbacks of Mr Biden’s domestic spending agenda as a condition of averting a default.

“I just got off the phone with the President a bit ago,” Mr McCarthy tweeted on Saturday evening. “After he wasted time and refused to negotiate for months, we’ve come to an agreement in principle that is worthy of the American people.”

Treasury Secretary Janet Yellen had warned of a possible default on June 1 if Congress failed to raise the ceiling on borrowing, but gave lawmakers some breathing room on Friday when she updated the estimate to June 5.

Even with the later deadline, the legislation will still have to clear Congress much more quickly than the normal timetable for even the most uncontroversial bills.

But it has rattled House conservatives angry that their leadership was yielding too much ground and worried Democrats, who complained that it was a betrayal of the voters who installed Mr Biden on a progressive mandate.

Democrats have framed the standoff as a “manufactured crisis” forced upon the country by Republicans, as the debt ceiling has been raised dozens of times by both parties with no attached demands and little drama.

Meanwhile moderates have voiced frustration that they are being asked to swallow a deal they had no role in negotiating and that they fear will lose them vulnerable seats at the next election.