There was a huge sigh of relief when after weeks of anxious waiting, United States President Joe Biden and House of Representatives Speaker Kevin McCarthy reached a compromise over debt ceiling and expenditure bill that Democrat Biden wanted to push through and Republican McCarthy wanted to smash. The deadlock threatened that the United States government would not have the money to pay bills, and that would have sent the American and the global economy into a tizzy.

This was one issue that weighed heavily on the mind of President Biden when he attended the G7 summit at Hiroshima last month, and returned home, cancelling his visit to Papua New Gunea and Australia. After protracted meetings with Speaker McCarthy, a deal was made, and McCarthy worked hard to push it through the House. There was opposition to the deal from the far right Republicans who wanted major cuts in expenditure proposed by President Biden, and there was opposition from far left Democrats who believed that President Biden has yielded ground to McCarthy and the Republicans.

But McCarthy managed to get more Democrats to vote for the debt ceiling bill even as more Republicans opposed it.  The bill is now with Senate, where the Democrats have a majority but the bill passed by the House of Representatives will not have an easy passage. Majority leader, Democrat Senator Charles Schumer said that there would be no amendments because then the bill would have to go back to the Congress or the House of Representatives, and there is no time to be lost. Both Houses of the Congress will have to pass the bill and President Biden will have to sign it before June 5 for the government not to default on its payments of bills.  

The clash between the Democrat White House and Republican-majority House of Representatives is understandable. The Republicans feel that the US government need to spend less by way of welfare measures and there should be less taxation because the private sector will push the economy towards better growth rates. The Democrats feel that unless money is spent on welfare measures, on climate change, there is no hope for the American economy to recover and that this would simultaneously hit America’s position as leader of the global economy. The Democrats feel that the government would have to provide a helping hand to the economy as the country recovers from the COVID-19 pandemic disruption, and policy interventions are also needed to revitalise the American economy.

The economic outlook of both the parties in America is opposed to each, and the two sides are forced to make a compromise because the Republicans are aware that the Democratic President Biden has the right to veto the House of Representatives’ bill cutting the government’s expenditure proposals. Given the principle of the separation of powers embedded in the American constitutional system, when the two Houses of the Congress – the House of Representatives and the Senate – disagree with the president, it will end in a deadlock because of the presidential veto.

Though it seems an impractical and rigid system, when disagreements arise between the US Congress and the President, the two sides are forced to talk to each other and reach a compromise to keep things moving. This requires both the parties to yield ground which is what has happened in the compromise deal reached between President Biden and Speaker McCarthy.

The fact is that the American economy, though a free market economy, needs government support in terms of policy, and the government is not always in a position to spend on welfare measures however necessary they may be. But the issue at stake is not merely as to what and how much government should spend. It is about the basic issue of whether the government should spend at all on the economy.