The US was on the brink of an economic default as Joe Biden and House Republicans under Speaker Joe McCarthy bickered on the debt ceiling. Now, however, they avoided economic catastrophe as a new debt ceiling deal has finally been made.

Biden and McCarthy finalized a budget agreement that would suspend the $31.4 trillion debt ceiling until January 1, 2025. Biden himself has stated that the deal was now ready to be voted on by Congress, which is held by the Republicans under McCarthy.

"This is a deal that's good news for ... the American people," said Biden during a press conference after he and McCarthy finally reached their debt ceiling deal, which was struck last Friday night, according to Reuters.

"It takes the threat of catastrophic default off the table, protects our hard-earned and historic economic recovery," the president added as the deal will prevent the US government from defaulting on its debt after weeks of heated negotiations between the Biden administration and House Republicans.

However, the deal still has to pass Congress before the June 5 deadline, which the US Treasury Department says it would run out of money to pay for all of its obligations and leading to a possible financial catastrophe.

Currently, Republicans have a slim majority in the House, though Democrats may vote with some of them for the deal to pass. The biggest hurdle might be the far-right Republicans who almost cost McCarthy the speakership earlier this year. However, Biden stated that he is confident McCarthy has enough votes for the measure to pass.

McCarthy and other House Republicans were unwavering in raising the debt ceiling unless the Democrats agreed to some budget cuts, which Finally agreed to.

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What Is the Debt Ceiling and Why Is It So Important?

First established by Congress in 1917, the debt ceiling limits the total national debt by setting the maximum amount of how much the government can borrow, according to The Conversation.

It happened at the height of the First World War and it was deemed necessary as then-President Woodrow Wilson wanted to "spend the money he deemed necessary to fight World War I without waiting for often-absent lawmakers to act." However, Congress did not take this one lying down and limited how much the government can borrow, this the debt ceiling was born.

With the raising of the ceiling, it would also reduce planned funding for the IRS, as well as impose new work requirements on some people who receive benefits from the federal program known as SNAP. It would also take back billions of dollars in unspent funds from pandemic relief programs.

Debt Ceiling Deal Leads to Market Rallies Around the World

After Biden and McCarthy reached their deal on Saturday, it empowered markets in Asia, proving that its ramifications did not just affect the US, but also the world.

 The Nikkei 225 in Japan pushed its 33-year high to its highest levels of trade since July 1990 as it jumped 1.54%. Meanwhile, Australia's e S&P/ASX 200 climbed 0.98%. The same cannot be said with Mainland China, as the Shenzhen Component went down 0.16% and Hong Kong's Hang Seng index continued sliding.

Just before the deal, Wall Street also rallied as optimism that a deal will be made led to the Nasdaq Composite posting a fifth straight week of gains, according to CNBC.

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Written by: Rick Martin

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