With the passing of the debt ceiling bill, Biden announces “Crisis averted”

Following the passing of a debt ceiling bill to prevent the first-ever ruin in the greatest economy in the world and a global financial emergency, US President Joe Biden declared a “crisis averted” on Friday.

In his first-ever address to the country from the White House Oval Office, he said, “Keeping the full faith and credit of the United States and passing a budget that proceeds to grow our economy and reflects our importance as a nation is essential to all the progress we’ve made in the last few years.”

“I’m here today to report on a problem that we were able to avert and to discuss the steps we are taking to safeguard America’s future. It was crucial to pass this budget agreement. Following Congress’ approval of a debt ceiling measure that will suspend the country’s $31.4 trillion borrowing cap for two years and prevent a historic default, Vice President Biden made his comments.

A day after being approved by the House of Representatives, the bill was approved by the Senate late on Thursday with a 63-36 majority. Prior to the anticipated insolvency date of June 5, Mr. Biden stated that he will sign the budget agreement into law on Saturday.

In an effort to put an end to the bitter squabbling that had consumed Washington for the previous four months as the agreement was negotiated, the President emphasized the “bipartisan nature of the package” Bipartisanship is difficult, and it is difficult, but we must never give up trying, Mr. Biden added.

Image source: the Newyork times

Because of situations like the one we just faced, where the American economy and the global economy are in danger of collapsing, there is no other way, no matter how tense our political situation becomes, to see each other as fellow Americans rather than as enemies, to treat each other with respect and dignity, and to work together.

Chuck Schumer, the majority leader in the Senate, helped the bill go through the upper enclosure on Thursday by permitting 11 amendments that had all previously failed. To allay concerns that restrictions on defense funding will not prevent US backing for Ukraine, he and Mitch McConnell minority leader also released a joint statement.

The US economy was in jeopardy for several weeks until the Senate gave its approval, ending weeks of political bluster and showmanship in Washington. Extreme voices threatened to lead the United States into a national debt default for the first term in our 247-year history, Mr. Biden said.

“Nothing, absolutely nothing, would have stood more reckless. There was nothing that could have been worse. The economy of our nation would have been devastated. The Treasury Department had to take drastic measures to stay afloat as the deadline drew near, such as auctioning three-day currency management bills.

Image source: Mncb

The government was planning to auction off one-day cash management notes worth $15 billion on Friday for issuance on June 5. On May 30, the Treasury’s balance was at its lowest level since 2017. It was $37.4 billion. Since the debt ceiling was surpassed in January, it was unable to obtain financing.

“The full belief and acclaim of the United States must never be used as a bargaining chip,” Treasury Secretary Janet Yellen said. “Congress has a duty to ensure that the United States can pay its bills on time.”

The consequences of a US debt default have been repeatedly highlighted by Ms. Yellen, the White House, and economic analysts, adding urgency to discussions between Mr. Biden and House Speaker Kevin McCarthy. A default would have wreaked havoc on the biggest economy in the world, sending it into increasing unemployment and recession while also having an impact on the rest of the world.

According to Ms. Yellen, a default “would have resulted in severe hardship for American families, potentially resulting in the loss of millions of employment and trillions in household prosperity, as well as higher financing costs for American taxpayers for years to come.”

Since the debt ceiling contract suspended the borrowing limit until the 2024 US presidential election, those worries seem to have subsided for the time being.  However, the economy is still not in the clear.

The country’s “AAA” credit rating was maintained on “Rating Watch Negative” by credit rating agency Fitch on Friday. According to Fitch, the ongoing fight in Washington has made people less confident in the government’s capacity to handle its financial obligations.

According to the agency, “Governance has actually steadily declined over the last 15 years, with rising political polarization and partisanship as witnessed by the contentious 2020 election, repeated brinkmanship over the debt limit, and failure to address fiscal challenges from growing mandatory spending has led to growing fiscal depletion and debt burden.”

Hardline Progressive Democrats were concerned about additional job requirements for Americans getting food help as well as permitting reforms for energy projects, while Republicans wanted the package to do more to reduce expenditure and scale back social programs.

Additionally, the law cancels unused funding from the COVID-19 emergency and reduces expenditure on the Internal Revenue Service, two key Republican concerns.

“No one achieved their goals in full, but the American public succeeded in meeting their needs. A financial problem and an economic meltdown were avoided, according to Mr. Biden. The bill, according to the nonpartisan Congressional Budget Office, would cut deficits by $1.5 trillion over the following ten years.

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