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 InstaTrade
© 2007-2025

Recommended Stories

The U.S. and the European Union Reach a Difficult Trade Agreement

The euro rose against the U.S. dollar following reports that the United States and the European Union had reached a hard-fought agreement under which the EU will face 15% tariffs

Jakub Novak 09:16 2025-07-28 UTC+2

What to Pay Attention to on July 28? A Breakdown of Fundamental Events for Beginners

There are no macroeconomic reports scheduled for Monday. Thus, unless Donald Trump makes some new high-profile statements or decisions, traders may face low volatility and a flat market on Monday

Paolo Greco 06:18 2025-07-28 UTC+2

EUR/USD Overview – July 28: Very little time left before August 1

The EUR/USD currency pair is maintaining a bullish tone on the 4-hour timeframe. While the British pound has shown a fairly sharp decline in recent days, the euro

Paolo Greco 03:48 2025-07-28 UTC+2

GBP/USD Overview – July 28: The Pound's Unexpected Collapse and Weak UK Data

The GBP/USD currency pair declined significantly on Friday. This drop in the British pound is somewhat puzzling, as there were no strong fundamental reasons behind it. We do not believe

Paolo Greco 03:48 2025-07-28 UTC+2

EUR/USD. The Hottest Week of July: FOMC Meeting, Core PCE Index, Eurozone Inflation, US GDP, and Nonfarm Payrolls

The upcoming week promises to be volatile. The economic calendar is packed with key fundamental events — including Nonfarm Payrolls, the FOMC meeting, eurozone inflation data, the ISM Manufacturing Index

Irina Manzenko 00:48 2025-07-28 UTC+2

GBP/USD Overview. Weekly Preview. Fed Meeting and Key Labor Market Data

The GBP/USD currency pair declined significantly at the end of last week. This sharp drop in the British pound raises some confusion, as there were no solid reasons for such

Paolo Greco 00:48 2025-07-28 UTC+2

EUR/USD Overview. Weekly Preview. Will the Euro Follow the Pound's Decline?

The EUR/USD currency pair maintains a bullish bias on the 4-hour timeframe. While the British pound has shown a notable decline in recent days, the euro

Paolo Greco 00:48 2025-07-28 UTC+2

Euro Currency – Weekly Preview

There will be few news events in Europe. However, they are not particularly necessary. The U.S. will have a very intense and diverse news cycle. As a result, market participants

Chin Zhao 00:48 2025-07-28 UTC+2

British Pound – Weekly Preview

For the pound, the new week promises to be very uneventful. No important data is expected from the United Kingdom, so all attention will shift to the dollar

Chin Zhao 00:48 2025-07-28 UTC+2

US Dollar – Weekly Preview

Here we are, finally turning to the dollar and the United States. Let's begin with the most important events. First and foremost — the Federal Reserve meeting. Although

Chin Zhao 00:47 2025-07-28 UTC+2
Can't speak right now?
Ask your question in the chat.
 

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 InstaTrade anyway.

We are sorry for any inconvenience caused by this message.