Biden has nine days to raise the US debt ceiling

First modification: 05/27/2023 – 16:39

The world is waiting for an agreement to raise the US debt ceiling.

The context is that the United States can borrow only the limit set by Congress, which requires a legislative agreement to deal with the debts at this time. negotiations in whichPresident Joe Biden reiterates to be calm.

If the United States does not raise the debt ceiling, the country would enter a financial deficit to manage it, a scenario that is detrimental to its economy and with collateral effects on the world market.

“Things are looking good, I am very optimistic,” the president said on Friday.

However, negotiations between the White House and the Republicans could drag on for another week as no deal has been reached.

The President’s comment comes after Treasury Secretary Janet Yellen updated her estimate of the deadline after which the country could default. On Friday she informed Congress that it will be June 5 instead of the first of the same month. A brief respite for the White House.

“Based on the most recent data available, we now estimate that the Treasury will not have sufficient resources to meet the government’s obligations if Congress has not raised or suspended the debt ceiling by June 5,” Yellen detailed Friday in a letter to elected congressmen.

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Yellen recalled that the Treasury has to disburse 130,000 million dollars in the first two days of June for Social Security, veterans and Medicaid recipients (the government health program), bringing the state coffers “at an extremely low level of resources “.

“Waiting until the last minute to raise the debt ceiling can cause serious damage to business and consumer confidence,” he warned.

For her part, IMF director Kristalina Georgieva said that same day that finding a solution is “essential” for the world economy, while stressing that the United States has to do “more to reduce public debt.”

Social expenses, the center of negotiations

Therefore, the White House is negotiating with the Republicans to find a two-year budget agreement, which would extend the debt limit until 2025. The Republicans ask as a condition a decrease in spending.

The deal would include spending cuts in 2024 and a 1% cap on spending growth in 2025. It would freeze some payments, but it wouldn’t affect defense and veterans budgets, they reported. The New York Times and the Washington Post.

However, the Republican and Speaker of the House of Representatives, Kevin McCarthy, is pressing to reduce social spending, something that Joe Biden tries to avoid. So the talks about Medicaid, food stamps and other such programs divide Democrats and Republicans.

Republicans are demanding, among other things, increasing the work requirements of recipients of benefits such as food aid, a longstanding goal that Democrats have strongly opposed.

White House spokesman Andrew Bates called the Republican proposals “cruel and senseless.”

Possible non-payment of invoices

On January 19, the United States reached its technical debt limit, which led the Treasury to use “extraordinary measures” and limit some government investments so that it could continue paying its obligations.

However, according to Yellen, these measures will no longer be enough from June 5 and the White House needs to find an agreement with Congress in order to increase the country’s debt ceiling and thus pay its bills.

The United States, like almost all countries, spends more than it takes in and requires borrowing enormous amounts of money. However, there is a cap for the government to apply for. Currently, the US debt ceiling is $31 trillion, the highest in the world.

Under the US Constitution, only Congress can authorize or increase the debt limit, a common procedure in the United States. However, with a Republican-majority House of Representatives and a Democratic-majority Senate, Joe Biden finds himself in a delicate position to negotiate.

If a deal is reached with the Republicans, and it is voted on by the House of Representatives, it would still have to be adopted by the Senate.

By not quickly signing an agreement, the United States could be in default of its bills for the first time in its history, raising fears of a global financial crisis.

With EFE, AP and local media