Bankruptcy threatens – US Chamber approves Biden’s debt compromise

The U.S. House of Representatives has passed a bill to avert a U.S. bankruptcy at the last minute. A majority of lawmakers in the House of Representatives voted Wednesday evening (local time) in favor of the bill, which would suspend the US debt ceiling through 2025 while significantly reducing planned government spending over the next two years.

To ensure that the US government does not run out of money, after the House of Representatives, the Senate must also approve the project and President Joe Biden must sign the law. Time pressure is high: US Treasury Secretary Janet Yellen recently warned that insolvency could occur on June 5 – that is, as early as Monday.

All parties dissatisfied
The Biden administration and Republicans, who have a narrow majority in the House of Representatives, have struggled in recent weeks to find a cross-party compromise in long and arduous negotiations. Many politicians in both the Democrats and Republicans of Biden are dissatisfied with the result, especially on the left and right of both parties.

However, in view of the imminent bankruptcy of the US government, which could trigger a financial and economic crisis with global repercussions, members of parliament from the center of both parties rallied behind the deal, securing the necessary majority for the vote.

In the House of Representatives, 314 members voted for the bill: 149 Republicans and 165 Democrats. The vote was a major test for Republican Majority Leader Kevin McCarthy. The Republican encountered opposition from radical members of his faction. McCarthy was elected president of the chamber earlier this year after a historic election mess. The turbulence had greatly weakened his position.

McCarthy’s chair wobbles
McCarthy now rallied nearly two-thirds of his faction behind him in the vote – the Democrats had set this as a bar for the majority leader in the chamber. At the same time, as expected, dozens of Republicans refused to approve the deal: exactly 71 MPs. In the end, more Democrats than Republicans voted for the compromise, giving the project a staggering bipartisan majority.

For Biden and McCarthy, this is initially a success. The still significant number of Republican dissenters could nevertheless spark debate within McCarthy’s already divided faction. One of his critics – Republican Dan Bishop, who recently passed a vote of no confidence in McCarthy – tweeted after the vote: “This is what it looks like when the one-party cartel betrays the American people.”

What’s more, the Senate vote is still pending: Democratic majority leader in the chamber, Chuck Schumer, vowed Wednesday night to put the bill to a vote there as soon as possible in anticipation of the impending bankruptcy deadline on Monday.

Social benefits are cut
The compromise is intended to effectively freeze the size of the federal budget that Democrats wanted to increase under Biden. The budgets of many federal agencies and ministries would be adjusted for this. The Republicans could also force recipients of certain social benefits to prove a job. The Democrats actually wanted to increase state revenues by taxing the rich more heavily. Republicans opposed it.

For some radical Republicans, the cuts in the deal don’t go far enough. In contrast, some left-wing Democrats deplore the cuts to social programs. And those moderates in the middle who finally agreed to the deal aren’t exactly pleased either.

Biden explained, “Neither side got everything they wanted.” It was a cross-party compromise. However, the House of Representatives has now taken a decisive step forward to avoid a default.