In a rare speech from the Oval Office, President Joe Biden announced Friday that he will sign the bill authorizing an increase in the US debt limit on Saturday, removing the “catastrophic” threat of a default from the world’s largest economy. In a live broadcast during prime-time television and from his iconic desk, Biden said the bipartisan deal was a compromise in which “nobody got what they wanted.”
The 80-year-old Democratic president stressed that finding consensus across party lines is difficult but necessary and that unity must always be the goal. Without this agreement, the United States would have faced a default on its obligations as of June 5, the deadline set by the Treasury. This would have generated panic in the markets, large job losses, and a recession with worldwide implications.
Although the House of Representatives and the Senate set aside their differences and reached an agreement at the last minute, the reputation of the US economy was affected. The rating agency Fitch maintains the US “AAA” credit rating on negative watch and plans to review it in the third quarter of 2023. The agency is assessing the implications of this risky policy episode and the medium-term outlook for fiscal and debt trajectories.
The bill passed by Congress suspends the federal debt limit until January 2025, providing sufficient cushion to avoid a new confrontation before the 2024 presidential election. It also sets limits on federal spending and provides for a $10 billion reduction in funding for modernizing and strengthening fiscal controls.
Biden, who intends to run for re-election in 2024, considers the resolution of this political crisis a victory that demonstrates his negotiating skills. During his speech, he conveyed a tone of confidence and calm, celebrating his opponents for negotiating in good faith and promising Americans that he has never been more optimistic. Biden highlighted working together with Kevin McCarthy, the House Republican leader and longtime ally of former President Donald Trump, whom Biden defeated in 2020 and who also plans to run again in 2024. Biden praised McCarthy and the Republican negotiators for their honesty and mutual respect.