2023-05-21 19:07:44
There are only ten days left for the two parties to reach an agreement and allow America to continue paying its bills.
President Joe Biden and Republican Leader Kevin McCarthy will meet in person on Monday to continue their very tough negotiations on the US debt ceiling.
There are only ten days left for the two parties to reach an agreement and allow America to continue paying its bills. But the negotiations seem for the moment completely deadlocked.
“My position hasn’t changed, Washington can’t keep spending money we don’t have,” Kevin McCarthy, the main Republican protagonist on this issue, tweeted after a call with the Democratic leader. .
“We will see each other tomorrow in person to continue negotiations,” he announced, information quickly confirmed by the White House.
Like almost all major economies, the United States lives on credit. But, it is an American peculiarity, it is the prerogative of Congress to vote to raise the maximum amount of public debt that the world’s largest economy is authorized to accumulate.
This year, the Republicans refuse to raise this famous “ceiling” without conditions, demanding drastic budget cuts before giving the green light. The Democrats refuse. And each camp accuses the other of being responsible for this situation.
Traveling to the G7 in Japan, Joe Biden slammed the Conservatives’ proposals on Sunday: “It’s time for the other side to abandon their extreme positions, because much of what they have already proposed is simply, frankly, unacceptable. “, he said, believing however that a solution could still be found.
Consequences for the global economy
It is indeed very common for last-minute deals to be made on this type of file, but there is very little time left in the United States to avoid a default.
This unprecedented situation would have potentially catastrophic consequences for the American and global economy.
The world’s largest economy, in fact, would not only be unable to pay bills and wages, but also to repay its creditors.
For the first time, holders of US Treasury bonds, the king of global finance, could no longer recover their investment. That could happen as early as June 1, according to Treasury Secretary Janet Yellen.
She also ruled out the possibility of recourse to the 14th amendment to the American Constitution, which could theoretically make it possible to circumvent the obligation to raise the ceiling. The article indeed stipulates that “the validity of the public debt of the United States (…) must not be questioned”.
It doesn’t seem like it can “be used appropriately in these circumstances, given the legal uncertainty surrounding it and given the tight deadline,” Janet Yellen said Sunday.
Joe Biden had, a little earlier, indicated that he was studying this possibility, noting however that the question was whether he “can be done and invoked in time”.
Reducing federal spending, sticking point
However, optimism was in order in the middle of the week, after a meeting between Democratic and Republican congressional officials with Joe Biden at the White House.
But the proposal made Friday evening by the Republican team “was a big step backwards”, according to White House spokeswoman Karine Jean-Pierre, deploring “a set of extreme partisan demands”.
She pointed the finger at Republican officials, under the thumb of those close to Donald Trump, “who (threaten) to put our nation in default for the first time in our history”.
Kevin McCarthy had also mentioned Saturday evening “a step backwards in the negotiations”, but on the part of the White House, accusing “the left wing of the Democratic Party” of being “in control”.
The sticking point: Republicans’ demand to cut federal spending, back to 2022 levels. That is, cut $130 billion in spending. A red line for the Democrats.
The Biden administration is proposing to cut spending while raising taxes for the wealthy and corporations that today benefit from generous tax rebates. What the Republicans refuse.
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