Democrats and Republicans in the Senate have reached an agreement to temporarily raise the debt ceiling until early December.
The case is being updated.
“We have reached an agreement to extend the debt ceiling until early December, and we are hopeful that we can do so as soon as today,” said Chuck Schumer, Democratic leader in the Senate, according to CNBC.
The announcement of an agreement comes after Republicans in Congress in Washington proposed a temporary solution to ensure that the debt ceiling of the state apparatus is raised until December.
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CNBC writes that Schumer announced the deal after discussions with Mitch McConnell, the Republican leader in the Senate.
The debt ceiling in the US is a cap on public debt. Since the country has a deficit in the state budget, this limit must be raised, but Democrats and Republicans disagree on how to do it.
– It is a pattern with quite tough fronts between the parties, and then a solution is forced because the negative consequences of default on public debt are too great to take responsibility. In that sense, it’s no surprise, Knut Magnussen, an economist at DNB Markets, tells E24.
However, it points out that it is only a short-term extension, so the parties “should take advantage of the time to find a more durable solution.”
– How it ends is difficult to say in advance, but in 2019 the entire ceiling was removed, it was suspended, for two years.
Earlier, the Minister of Finance, Janet Yellen, warned that the country’s debt will reach the ceiling as of October 18 and that it must be increased if the United States wants to continue to meet its obligations.
An emergency extension will only postpone the problem, but it will still give time to find a longer-term solution.
The situation has stalled politically. On Wednesday, Republicans proposed a temporary solution, which may prevent a shutdown in the state apparatus in two weeks.
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In the markets, the situation has been closely monitored, as an agreement is needed to prevent the United States from defaulting on public debt in the worst case scenario. On Wall Street, the mood is good after the deal too:
- The Dow Jones is up 1.6 percent
- The S&P 500 is up 1.5 percent
- Nasdaq is up 1.7 percent
– Political game
DNB Markets economist Knut Magnussen noted Wednesday that “there has been a political game around the debt ceiling since 2011.”
– The solutions are imposed on this each time, it is a pattern. There are no politicians who are really heading into the abyss, even though they have now started to approach the deadline, he said, adding that “this is only pushing the problem forward.”
The US Treasury Department is currently using so-called extraordinary emergency funds to pay bills, after hitting the previous debt ceiling in July.
According to CNBC, these can only be used until mid-October.