empty
30.05.2023 11:16 AM
Debt ceiling deal unlikely to ease US budget deficit

This image is no longer relevant

The agreement reached between US President Joe Biden and House Speaker Kevin McCarthy on Saturday will not lead to a significant change in the country's finances because it primarily affects a portion of the budget known as discretionary spending. This will limit spending on certain federal government services, but will not significantly reduce the overall budget deficit projected to be around $20 trillion over the next decade.

This image is no longer relevant

The deal restricts non-defense spending, which constitutes a relatively small part of the total budget, but includes funding for the environment, scientific research, the Department of Justice, and more. With an annual inflation rate of 5%, there won't be enough money next year to sustain the same services outside of the national security areas.

This image is no longer relevant

Even in defense, some selective cuts will be made, as the 3.3% increase agreed upon by the White House and Republican representatives falls below the inflation level.

The deal does not affect most rapidly growing programs such as Medicare, Social Security, or Medicaid, which make up a significant portion of the budget.

Stock market indices reacted positively to the agreement, while the dollar index, which strengthened in anticipation of a possible default in the US, showed signs of a slowdown.

This image is no longer relevant

The Biden team agreed to cut $21 billion over ten years from IRS enforcement and $28 billion from previous COVID spending, which, according to the White House, will help prevent internal agencies from virtually freezing spending next year. This represents a compromise as House Republicans sought to repeal all non-obligatory COVID assistance spending and most of the $80 billion allocated to the IRS in the Biden Inflation Reduction Act.

In short, the deal will prevent a default, but it will only marginally reduce overall spending and borrowing. It may also alleviate inflationary pressure by slowing down economic growth.

Andrey Shevchenko,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

XAU/USD. Analysis and Forecast

After setting a new all-time high at $3500 under overbought conditions, gold prices are pulling back. Nevertheless, bullish sentiment remains strong due to persistent concerns over the potential economic fallout

Irina Yanina 19:02 2025-04-22 UTC+2

EUR/GBP. Analysis and Forecast

The EUR/GBP pair is losing ground today after two consecutive days of gains, trading near the psychological level of 0.8600. The pound is receiving support from optimism surrounding ongoing trade

Irina Yanina 11:52 2025-04-22 UTC+2

Why the U.S. Dollar Keeps Falling

The U.S. dollar fell to its lowest level since January 2024 after President Donald Trump's criticism of the Federal Reserve sparked concerns over the central bank's independence. The dollar weakened

Jakub Novak 11:12 2025-04-22 UTC+2

Loss of Confidence in the Fed Will Pressure the Dollar (Bitcoin Likely to Continue Rising, USD/CAD to Decline)

On Monday, the U.S. stock market experienced a sharp decline, pulling down many global exchanges, as the "turbulent" actions of President Trump continue to shift from one hot topic

Pati Gani 09:00 2025-04-22 UTC+2

Market: Still Waters Run Deep

It's impossible to inject capital into an economy destabilized by politics. Capital continues to flow out of the United States, and Donald Trump's attacks on the Federal Reserve only accelerate

Marek Petkovich 08:52 2025-04-22 UTC+2

What to Pay Attention to on April 22? A Breakdown of Fundamental Events for Beginners

No macroeconomic events are scheduled for Tuesday—neither in the U.S., the Eurozone, Germany, nor the U.K. Thus, even if the market were paying any attention to macroeconomic data, it simply

Paolo Greco 07:46 2025-04-22 UTC+2

GBP/USD Overview – April 22: Dollar Decline Neutralizes Any Positive Economic Changes

The GBP/USD currency pair also traded higher on Monday despite no clear reasons or fundamental grounds for this movement. However, the pound has risen even on days when the euro

Paolo Greco 03:12 2025-04-22 UTC+2

EUR/USD Overview – April 22: The Emperor Has No Clothes...

The EUR/USD currency pair began Monday with a sharp drop from the opening. Interestingly, this time, the fall of the US dollar wasn't triggered by the American president. Any specific

Paolo Greco 03:12 2025-04-22 UTC+2

Will Trump Fire Powell?

The U.S. Dollar Index updated a three-year low on Monday, falling into the 97 range (for the first time since March 2022). The greenback started the trading week with

Irina Manzenko 01:07 2025-04-22 UTC+2

Panic hasn't gone anywhere – the dollar is being sold off, gold is rising, and the S&P 500 has turned downward again

The total speculative bearish position on the US dollar more than doubled over the reporting week, reaching -$10.1 billion. The Canadian dollar and the yen strengthened the most, while

Kuvat Raharjo 01:07 2025-04-22 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.