The passage of the law to increase the national debt of the United States helped to prevent an economic crisis and a real economic collapse.
This was stated by US President Joe Biden, Bloomberg reports.
"Nobody got everything they wanted, but the American people got what they needed. We managed to prevent an economic crisis and a real economic collapse," Biden said.
If politicians failed to agree on a budget, the United States would face default for the first time in its 247-year history, he said.
"There is nothing more irresponsible than a default. Nothing would be more catastrophic. Our economy would be driven into recession," he added.
US default risk
The agreement that Biden made with the Speaker of the House of Representatives, Kevin McCarthy, made it possible to avoid the first default in the country's history, which would have catastrophic consequences for the US economy and the whole world. Politicians agreed to end the debt limit by January 1, 2025, in exchange for curbs on government spending.
If the politicians did not reach an agreement, the country would face default. The government would not be able to borrow money to cover spending and this would generally affect financial markets and spike interest rates.
As John Kirby, the strategic communications coordinator of the National Security Council, noted, even in the event of default, the United States would continue to support Ukraine with military aid.
The Congressional Budget Office projects that the deal will reduce the federal budget deficit by about $1.5 trillion over a decade.
It will be recalled that the Fitch International Agency warned the USA that it may still lower the country's credit rating. Despite the fact that Congress passed a law on raising the national debt limit, which made it possible to avoid the default that was supposed to occur on June 5.
This is reported by CNN.
Fitch said repeated political confrontations over the federal government's borrowing limit are reducing confidence in them on fiscal and debt issues.
Although the decision to raise the national debt limit is decided, the agency expressed deep concern about the political polarization in Washington.
"We believe that the repeated political confrontations around the debt limit and the last-minute resolution of the issue before date X (when the cash position of the Ministry of Finance is exhausted) reduce confidence in public administration on financial and debt policy issues," Fitch noted.