The US reached an agreement on the debt ceiling

The Speaker of the House of Representatives of the US Congress, Republican Kevin McCarthy, announced an agreement with the White House to prevent a sovereign default.

The text of the agreement will be presented today, the House of Representatives will vote on Wednesday, May 31. According to McCarthy, the agreement implies «historic spending cuts» and «reforms that will lift people out of poverty.»

Recall that the House of Representatives approved a bill to raise the debt limit at the end of April, but with a significant tightening of budget policy, including cuts in government spending. It is worth noting that Republicans have a majority in the House of Representatives, and in order for the law to pass further, it must be approved in the Senate, where Democrats, in turn, prevail.

This bill involves raising the ceiling by $1.5 trillion, but with a parallel reduction in spending by $4.5 trillion. The Democrats did not support the proposal.

On May 7, the US Treasury Department warned that in early June the US could face default if the country does not pass a bill to raise the debt ceiling. Later, on May 27, Finance Minister Janet Yellen said that the agency may not be able to service obligations in full if Congress does not expand borrowing limits by June 5.

The negotiators agreed to limit non-defense spending at the level of 2023 for a year and increase it by 1% in 2025. Now the deal must be approved in both houses of Congress by June 5 – the date after which the US Treasury Department will no longer be able to fulfill its debt obligations. If the deal is approved, the United States will be able to avoid default, which has never happened in the country's history.

As of 1939, the debt ceiling was set at $45 billion, and it has been raised more than 100 times since World War II. In October 2021, it was raised from $28.4 trillion to $28.9 trillion, in December 2021 – to $31.4 trillion.