Biden approves higher US debt ceiling

US President Joe Biden signed a bill to raise the national debt ceiling, which will prevent a possible default and avoid a “catastrophic” blow to the economy, writes Bloomberg, citing a White House statement.

In a statement, Biden thanked members of Congress “for the partnership.”

Formerly US House of Representatives supported bill to raise the debt ceiling. As Reuters wrote, Biden was supposed to sign the document no later than June 5, when the authorities are expected to run out of funds to service the public debt. The President welcomed the passage of the bill, noting that it is “good news for the American people and the American economy.” He also addressed the Senate and called for approval of the initiative “as soon as possible.” Biden saw the bill as a bipartisan compromise, adding that “neither side got everything it wanted.”

On May 28, Speaker of the US House of Representatives Republican Kevin McCarthy announced that he had reached an agreement in principle with the White House to prevent a sovereign default. The text of the agreement was published on 29 May.

It follows from this that the government will be obliged to comply with the new limits on budget spending, subject to the actual abolition of the mechanism. The US debt limit of $31.4 trillion was reached on January 19. In talks to raise the ceiling, Republicans pushed for a 19-year government spending cap that the Biden administration disagreed with.

One of the provisions of the agreement provides for the suspension until January 1, 2025 of paragraph 3101 (b) of section 31 “Currency and finance” of the US Code. It states that the nominal amount of liabilities, together with interest guaranteed by the US government, cannot exceed “$14.294 trillion at a time” (this is the original ceiling, which has been revised many times since its introduction in the code). It also states that the limit can be changed by Congress. The last time this happened was in 2021, when the national debt ceiling was raised by $2.5 trillion to $31.4 trillion.

At the end of the freeze period, from January 2, 2025, the ceiling can be increased in accordance with the current need, follows from the agreement between Biden and McCarthy.

The document also establishes the boundaries of the US federal budget for 2024 and 2025 fiscal years. Thus, the defense part of the budget in 2024 will be limited to $886.35 billion, non-defense – $703.65 billion. The defense budget for 2025 was fixed at $895.21 billion, non-defense – at $710.69 billion.