<br>America’s debt-ceiling deal means it should now avoid Armageddon<br><p data-caps=”initial” class=”article__body-text article__body-text–dropcap“>EVEN IN A sharply divided Washington, DC, politics-as-usual sometimes works. America has a history of debt-ceiling drama, staring into the abyss of a government default before reaching a deal at the last minute. This time, too, the familiar pattern has repeated itself. Intense negotiations went down to the wire. But President Joe Biden and Kevin McCarthy, the Republican speaker of the House of Representatives, resolved the final points of an agreement in a phone call on the evening of May 27th.</p><br><p class=”article__body-text”>Some feared that this time would be different. Such is the depth of the partisan divide in Washington nowadays, and so ardent the radicalism of the extremists in both camps, the worry was that a compromise might prove elusive. Republicans were demanding budget cuts on a scale—equivalent to about 25% in real terms—that was unacceptable to Democrats.</p><br><p class=”article__body-text”>Yet the looming deadline concentrated minds as usual. The “X-date”, when the country might be unable to pay its bills unless Congress raised or suspended the debt ceiling of $31.4trn, was fast approaching. Although Janet Yellen, the treasury secretary, had on May 26th moved back her estimate of the X-date from June 1st to June 5th, time was running short to reach a deal and get it through both chambers of Congress. The consequences of a debt default, the first in America’s modern history, would be dire: the shock from disruption in the biggest sovereign-debt market, accounting for about one-third of the global total and underpinning pricing in financial markets everywhere, threatened to reverberate through every economy around the world. The gravity of the situation led Mr Biden to cut short his trip to Asia after the G7 summit, and prompted desperate speculation about whether there might be hitherto untested ways around a crisis, for example by invoking the 14th Amendment, in effect declaring the debt ceiling unconstitutional.</p><br>
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2023-05-28 09:45:16<br>
Original from <a href=”https://www.economist.com/united-states/2023/05/28/americas-debt-ceiling-deal-means-it-should-now-avoid-armageddon” target=”_blank” style=”color:blue” rel=”noopener”>www.economist.com</a><br>
