President Joe Biden and Republican opponents have reached a preliminary agreement to raise the US debt ceiling, thus avoiding a default. The deal, which is yet to be approved by Congress, is being hailed as a compromise. President Biden emphasized that the agreement prevents a catastrophic default that could have led to an economic recession, job losses, and devastation to retirement accounts.
House Speaker Kevin McCarthy praised the deal for its historic reductions in spending and reforms aimed at lifting people out of poverty. While specific details have not been officially released, reports suggest that non-defense government spending will remain steady for two years before experiencing a 1% increase in 2025. The potential impact on social programs, such as food assistance for low-income individuals, remains unclear.
If the US were to default, it would have severe consequences, including an immediate cessation of funds for welfare benefits and support programs. In the long term, a default would likely push the US economy into a recession, resulting in increased unemployment. This would also have significant global repercussions, as the US is a major trading partner for many countries. Furthermore, as the US dollar is the world’s reserve currency, a default would create panic and eventually lead to rising commodity prices.
Picture Courtesy: Google/images are subject to copyright
