First modification:
The race against time to avoid a default in the United States started: Joe Biden organized a face-to-face meeting on Tuesday with the leaders of the parliamentary opposition to try to reach an agreement on the largest public debt in the world.
The US president will meet with his main adversary on this issue, the leader of the Republican majority in the House of Representatives, Kevin McCarthy, as well as with Mitch McConnell, leader of the conservative minority in the Senate. At stake: America’s financial reputation and political prestige.
The 90-year-old Democrat knows how he handles this crisis will weigh on his budding re-election campaign. Kevin McCarthy, who was elected in extremis to lead the slim opposition majority in the House, also has an important game at stake for his political leadership.
– “Hostage” –
The president reiterated his mantra on this delicate debt issue on Friday, noting that Republicans are holding the economy “hostage” by conditioning the increase in or suspension of the country’s debt limit on being able to issue more credit and honor debt commitments. to “draconian” cuts in public spending. “These issues are not linked,” Biden says.
For the president, respect for the financial obligations accumulated by the country obliges parliamentarians from both parties, while the annual budget may be the subject of political debate. The Democrat always remembers that the debt ceiling was raised three times during the term of his predecessor Donald Trump.
“We, the Republicans, did what had to be done. The ball is in the field of the Democrats,” estimated on Twitter, on the contrary, one of the opposition representatives in the House, John Rose, who denounces that Joe Biden escapes a “serious” discussion of the conservative budget bill.
This tussle comes from an institutional peculiarity in the United States: it is the spring of Congress to vote regularly to increase the maximum amount of debt that the country can issue, in order to continue financing the operation of the country. Until the Presidency of Barack Obama, this vote was a formality. But in a polarized America, that’s no longer the case. The White House and congressional Republicans no longer have much time to reach an agreement.
– Tick Tock –
The US Treasury warns that without congressional approval between now and June 1, the government will have to cut spending and social benefits if it wants to continue honoring its obligations to creditors. The debt ceiling of 31.4 trillion dollars, the highest in absolute value among all the countries in the world, was reached in January. But the federal government established exceptional accounting measures to cope with the situation.
The United States, if this situation continues, could be unable to pay its bills and salaries of public employees, but also to repay its creditors. For the first time, holders of US Treasury bonds, considered the world’s safest investment that allows the United States to finance itself at low rates, would default.
According to the White House, a default would end the economic revival for which Biden takes credit, markets would collapse, the recession would be historic and unemployment would skyrocket, with consequences for the entire world economy. The calendar compresses the deadlines: the House of Representatives will session twelve days from now until June 1. And Biden leaves in two weeks on a multi-day diplomatic tour of Japan and Australia.
The White House is not closing the door on a temporary solution that could be to increase this debt limit for a short term.
