In light of mounting apprehensions of a possible default by early June, President of the United States, Joe Biden, and House majority leader, Representative Kevin McCarthy, have purportedly arrived at a “preliminary agreement” to increase the multitrillion-dollar debt ceiling of the federal government. As per a May 28 report by Reuters, which cites two sources privy to the talks, the “provisional” decision to raise the current $31.4 trillion debt ceiling was made subsequent to a 90-minute telephonic conversation between Biden and McCarthy on May 27.
Since the time of publication, President Biden has acknowledged the existence of the “agreement in principle” through his official Twitter account, clarifying that it will prevent the United States from being subjected to a “catastrophic default.” Biden further added that the agreement will be presented to the U.S. House of Representatives and Senate within the next day, and urged both chambers to promptly pass the agreement.
Simultaneously, McCarthy also utilized Twitter to validate the agreement in principle, asserting that Biden had “squandered time and declined to engage in negotiations for several months.” According to Reuters, although “the precise specifics of the arrangement remain unknown,” a decision has been reached to restrict the spending of the U.S. government for the next two years, with the exception of expenditures associated with national security.
As per a source knowledgeable about the agreement, the negotiators have decided to limit non-defense discretionary spending to the levels of 2023 for a year, followed by a 1% increase in 2025.
This development follows closely after the United States Treasury Secretary, Janet Yellen, cautioned of an impending default risk as early as June 1 if the debt limit is not suspended or increased, urging Congress to take swift action. Furthermore, on May 12, the United States Congressional Budget Office released a report highlighting that if the debt limit remains unaltered, there is a substantial possibility “that the government will be unable to fulfill all of its obligations at some point in the first two weeks of June.”
In recent times, numerous analysts have expressed a comparable viewpoint that increasing the debt ceiling could result in increased capital inflow into Bitcoin, which is currently valued at $27,919. On May 17, MacroJack, a former Wall Street trader, cautioned his followers on Twitter that the U.S. debt ceiling discussions are purely for show. He underscored the significance of owning hard assets as the dollar will be excessively printed, and mentioned that Bitcoin is the fastest horse in the race.
In the meantime, Jesse Myers, the Chief Operating Officer of investment firm Onramp, reminded his 50,100 followers on Twitter of the events that unfolded during the COVID-19 pandemic, highlighting that “Bitcoin emerged as the victor during the prior round of stimulus.” He put forth the notion that if the debt ceiling is raised, history could repeat itself, as it would compel the Federal Reserve to print more money.
