2023-05-10 00:00:00
No progress, but discussions continue and el ‘default’ “It is not an option“: Joe Biden and the Republican leaders in Congress They hold their positions on an increase in the country’s debt limit, but they will keep talking to try to avoid a default on the world’s largest economy.
(What can happen if the United States enters financial ‘default’).
For the president, the scenario of the United States failing in its obligations to its creditors due to lack of capacity to issue debt “It is not an option“.
“I didn’t see any movement“, summed up, on his side, the leader of the opposition majority in the House of Representatives, Kevin McCarthy, following meeting at the White House with the president, in a meeting in which the leader of the opposition minority in the Senate also participated, Mitch McConnell, In addition to top Democratic legislators, Hakeem Jeffries, minority leader in the lower house, and the principal of the senate, Chuck Schumer.
On Friday, May 12, there will be a new meeting between the two parties, McCarthy said. But for now, both sides they accuse each other of holding the economy ‘hostage’.
Democrats and Republicans do not agree on the increase in the debt ceiling of the United States, essential for the country to honor its payments, avoid a ‘default’, pay salaries of public officials, pensions and suppliers.
(See: Employment in the United States raises the possibility of rate hikes).
Republicans refuse to approve an increase or suspension of this ceiling unless the government accepts draconian cuts in public spending. Biden does not want to link the two issues.
Raising the debt issuance ceiling, which allows the government to pay expenses, is commonplace in the United States, where This system has been in operation for decades and is the spring of Congress.
However, increasing the current maximum, which is 31.4 trillion dollars and was already surpassed in January, turned into a war that pits the White House once morest Republican congressmen, who demand cut spending and reduce the fiscal deficit as a condition to authorize a greater indebtedness of the federal government.
(See: The US will deploy 1,500 soldiers at the border due to the arrival of migrants).
In 2011, the quagmire led to the United States temporarily losing control of coveted AAA rating on its debt. This year, McCarthy and his GOP decided to say ‘No’ to raising the debt ceiling, unless Democrats agree to drastic budget cuts first.
Opposition House Majority Leader Kevin McCarthy and Opposition Senate Minority Leader Mitch McConnell.
It’s a race once morest time. On Sunday, May 7, Treasury Secretary Janet Yellen warned that if Congress does not quickly resolve the matter “financial and economic chaos would unleash“.
“Clearly the distance is immense between the position of the president and that of the RepublicansYellen said later.
(Start once morest the clock to avoid ‘default’ in the US.)
Democrats are referring to the Republican House plan to raise the debt limit with budget cuts as the ”Default law”.
And a clash is also being prepared in the Senate, since 43 Republicans signed a letter addressed to Schumer expressing their collective commitment to oppose raising the debt ceiling “without substantial spending and budget reform“.
A failure to reach a solution may not only unleash a storm on Wall Street, but also to impact Biden, who is campaigning for his re-election in 2024.
Wall Street closed slightly lower this Tuesday, May 9, and the analysis firm Oxford Economics noted in a note that investors “avoid US debt due in June, July and August“.
Some titles called ‘Credit Default Swaps’, a kind of insurance once morest the risk of ‘default’, they are exchanged at historically high levels, one more indicator of the restlessness that reigns in the financial world.
Dollars.
“The debt ceiling is worrisome but investors have already seen this movie. overall ends well“, qualified Steve Sosnick, from Interactive Investment, summarizing the market sentiment.
It is not yet clear if the government will run out of funds to pay its debts. Last week the Treasury warned that this might happen on 1st June.
(See: The US might default on June 1: here’s the warning.)
Treasury payments might be interrupted for a few days until in mid-June the collection increases for the tax payment season.
The Americans see this wrestling as spectators and do not seem to take sides for either side.
A Gallup poll shows that In economic matters, only 35% trust Biden, and 38% in the Republican leadership.
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