The race against time to avoid a US default has begun: On Tuesday, Joe Biden is organizing face-to-face meetings with the heads of the parliamentary opposition to try to reach an agreement on the world’s largest public debt.
(US default would result in “chaos”: Yellen’s dire warning.)
The US President will meet with his main opponent in this case, the leader of the Republican majority in the House of Representatives, Kevin McCarthy, as well as with Mitch McConnell, the conservative minority leader in the Senate. At stake: the financial reputation of the United States and also much of its political prestige.
The 80-year-old Democrat knows how he handles this crisis will affect his new election campaign. Kevin McCarthy, who was elected in the extreme to lead the weak opposition majority in the House of Representatives, also has an important game at stake for his political leadership.
On Friday, Biden repeated his mantra on the sensitive issue of debt, suggesting that Republicans are holding the economy “hostage” by requiring an increase or suspension of the country’s debt limit on “draconian” cuts in government spending.
These things are not connected. Biden stated. For the president, honoring the financial obligations accrued to the state is an obligation for lawmakers of both parties, while the annual budget may be a subject of political debate.
The Democrat always remembers that the debt ceiling was raised three times during the term of his Republican predecessor, Donald Trump.
(What would happen if the United States defaulted on its financial debts).
“We Republicans did what needed to be done. The ball is in the Democrats’ court.”On the contrary, he appreciated on Twitter an opposition lawmaker in the House of Representatives, John Rose, who deplored that Biden was getting away with “serious” discussion of a conservative budget bill.
On Sunday, Treasury Secretary Janet Yellen again warned that unless Congress acts soon, “fiscal and economic chaos will ensue” with worldwide consequences.
“It is simply unacceptable for Congress to threaten economic disaster for American families and the global financial system.” Yellen told ABC.
This conflict comes from an institutional idiosyncrasy in the United States: It is the spring of Congress to vote regularly to increase the maximum amount of debt that the state can issue, in order to continue to fund the work of the federal government.
Until Barack Obama’s presidency, this vote was a formality. But in polarized America, that is no longer the case. The White House and congressional Republicans do not have much time to reach an agreement.
The US Treasury has warned that without congressional approval before June 1, the government will have to cut spending and social benefits if it wants to continue meeting its obligations to creditors.
The debt ceiling is $31.4 trillionThe highest absolute value among all countries in the world was reached in January.
But the federal government put in place extraordinary accounting measures to deal with the situation. The United States may not only be able to pay its bills and the salaries of public servants, but also to pay off its creditors.
For the first time, holders of US Treasury bonds, considered the safest investment in the world and allowing the US to fund itself at low rates, will default.
According to the White House, a default would end the economic recovery that Biden took credit for, and markets would crash, The recession will be historic and unemployment will skyrocket, with consequences for the entire global economy.
Calendar presses deadlines: The House of Representatives will be in session for only 12 days in the remainder of May.
Biden leaves after two weeks on a multi-day diplomatic tour of Japan and Australia. Some commentators think the Biden administration could, in the event of a complete deadlock in the debate, unilaterally authorize more broadcasts by invoking the Fourteenth Amendment to the Constitution.
This provision states that “the validity of the public debt of the United States shall not be questioned (…)”. “I’m not there yet,” Biden told MSNBC, without formally ruling out that option.
France Press agency
