Tension mounts in Congress over debt default risk
Democrats and Republicans are grappling on this conflicting subject after the announcement on Friday of possible “extraordinary measures” as early as next week to avoid a default in the country.
Treasury Secretary Janet Yellen has reached out to incoming Republican Speaker of the House of Representatives Kevin McCarthy because without a new cap, the US could find itself in default, a first in history from the country.
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In a letter addressed to the new Republican Speaker of the House of Representatives, Kevin McCarthy, Treasury Secretary Janet Yellen stressed that her department “is preparing to put in place this month” the first measures, which will concern several pension funds of public service employees.
Measures which could however only be temporary, alert Janet Yellen: in the absence of a new ceiling, the United States could find themselves in a situation of default, a first in the history of the country. “Failure to meet government obligations would cause irreparable damage to the American economy and the livelihoods of all Americans as well as to global finance,” insisted Janet Yellen in her letter.
But the Republican majority in the House of Representatives could play the clock on the subject, to try to force the Democrats to reverse certain expenditures voted before its installation. “The expenses are out of control, there has been no supervision and we cannot continue like this,” Kevin McCarthy told reporters on Thursday. “We need to change the way we spend money recklessly in this country and we’re going to make sure that’s what happens.”
On the Democratic side, Pennsylvania’s elected representative Brendan Boyle, a member of the House Budget Committee, found Janet Yellen’s announcement “extremely worrying”, accusing the Republicans “of considering it normal to take our economy hostage to impose extremist and unpopular reforms”. The White House, for its part, called on Congress to raise the country’s debt ceiling, already warning that it had no intention of negotiating with the Republican majority to obtain a vote on the subject.
“Legal obligations of both parties”
The spokeswoman for the executive, Karine Jean-Pierre, reminded the press that usually elected Republicans and Democrats cooperate on the subject “and that is what is needed”, adding that the question of the debt does not should not be politicized. If in the past lawmakers have raised or suspended the ceiling 78 times since 1960, most often without difficulty, the 79th time, in December 2021, has already caused serious tensions between the two parties.
The Republicans, then in the minority, had judged that raising the ceiling would amount to giving a blank check to the American president, accusing him of contributing to galloping inflation. For Democrats, raising the limit was only for the purpose of repaying borrowed money, including trillions spent under President Trump.
Congress had finally agreed, at the extreme limit, at midnight the same day the previous ceiling was reached, to raise it to 31,381 billion dollars (29,000 billion francs).
In her letter on Friday, Janet Yellen stresses that raising or suspending the ceiling “does not mean authorizing new spending” but simply “authorizing the government to fund the legal obligations that Congress and presidents of both parties have made in the past”.
In a sign of the nervousness that the idea of a potential US default is causing in the markets, rates on short-term US government bonds jumped after the publication of the letter. The yield on one-month Treasury bills rose to 4.43%, its highest level in more than 15 years (September 2007). It had already climbed a lot in recent months due to monetary tightening by the American Central Bank (Fed).
AFP
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