2023-05-24 18:50:57
A source familiar with the issue of raising the US public debt ceiling said that President Joe Biden is ready to “compromise” with the Republican opposition over public spending in order to put an end to a political conflict that might lead the United States to default on its debt.
And the US President presented to his opponent, Speaker of the House of Representatives Kevin McCarthy, a proposal on cuts that would reduce federal government spending by “more than a trillion dollars over ten years,” according to what was reported by Agence France-Presse.
This is in addition to Biden’s pledge to reduce the deficit, which exceeds three trillion dollars over ten years.
The source indicated that the White House is ready to put a ceiling on public spending over two years, while the Republicans are calling for a longer period.
The debt ceiling and the last-minute agreement… Will the 2011 scenario be repeated?
The informed source said that there will be an opportunity available on Wednesday for the two negotiating teams to discuss the new proposals, as they resume their talks at noon at the White House.
The 80-year-old Democrat, who had initially ruled out negotiating under the threat of state bankruptcy, also offered to reallocate funds originally earmarked for the COVID-19 response.
On Wednesday, US Treasury Secretary Janet Yellen reiterated the need for Democrats and Republicans to reach a compromise on the public budget that would enable Congress to approve raising the public debt ceiling.
The conservatives link their agreement to raise the public debt ceiling to an agreement to reduce public expenditures.
And Yellen stressed that if the Congress, which is divided between a Democratic Senate and a Republican House of Representatives, does not take action, “it seems almost certain that we will not last beyond June.”
Yellen emphasized that “the payment system we are adopting is designed to pay bills” to the government, and not to “select which bills to pay,” which does not give the treasury any margin to prioritize payments over another.
And if no agreement is reached, “we will be in a position to default on some of our obligations, which is unacceptable,” according to Yellen.
As of the first of June, the United States might find itself in a situation of default, that is, it will not be able to fulfill its financial obligations, whether at the level of wages and pensions, or to pay its financial obligations to creditors.
Yellen said the Treasury Department would soon provide Congress with additional clarity on when the United States might become in default.
Analysts expect that the US stock markets will suffer from a temporary severe shock in the event that the US Treasury is unable to meet all its financial obligations.
Likewise, it is expected that interest rates charged by investors on bonds issued by the United States will rise sharply.
This increase in the cost of credit will lead to a decline in business and household investment, as well as in consumption, which will lead to a severe recession in the United States, and possibly also in Europe and elsewhere.
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