It’s Washington D.C. weekend, and the US capital is almost at the gates of summer. Universities are celebrating graduation ceremonies, municipal swimming pools are preparing to open to the public in a few days, and the Senate is about to enter a week off. On Capitol Hill, however, the past week has been marked by intense negotiations against the clock. The House Republican Party and Joe Biden’s government are discussing a framework for increasing the cap on public debt issuance. They don’t have much time left: if there are no changes to the current debt ceiling, At the beginning of June, the North American country may run into default.
Trading temporarily suspended
The White House and the House Republican Party negotiated until Friday evening, after a day when the opposition caucus announced a “pause” in the conversation. They did not meet on Saturday, waiting for Biden to return from his trip to Japan. Speaker of the House of Representatives, Kevin McCarthy, He was optimistic during the week and said he hoped to reach an agreement by the end of this week, but there are no indications of that happening yet. “I don’t think we can move forward until the president can come home,” the Republican said on Saturday.
Democrats and Republicans disagree, above all, on the need for cuts in government spending. At the end of April, the opposition bloc, which dominates the House of Representatives, independently approved a budget bill that increases the ceiling imposed on the issuance of public debt, but at the same time reduces public spending for the next ten years.
While not much is known about the position of the Republican side in the current negotiations, the content of this bill offers a glimpse into what the party has in mind. For the White House, “Republicans are recycling a slightly watered-down version of their radical budget proposal.” that it would cut teachers’ jobs and law enforcement positions and “could jeopardize health care coverage for millions of Americans.”
The Biden administration is also critical that at the same time it is calling for cuts, the opposition party wants to extend “tax breaks for the richest and corporations.” “Republicans are taking the economy hostage and pushing us to the brink of default, which could cost millions of jobs. And lead the country into a recession, ”the White House complains.
What is the debt ceiling
The US “debt ceiling” is a limit placed by Congress on the amount of debt that a North American country can issue to meet its expenses. When it reaches it, it cannot issue more public debt.
The current limit is $31.4 trillion and the US actually reached it last January. At the time, the Treasury Department said it had taken “extraordinary steps” to continue managing government operations and programs. Chancellor of the Exchequer , Janet YellenHe warned that these measures would only work temporarily, allowing the government to fund its activities only until the beginning of June.
What will happen if Congress does not raise the ceiling
With that deadline fast approaching, the White House needs to negotiate an increase in the debt ceiling so that the United States does not default.
In general, if the government and the House of Representatives are on the same page, raising the debt ceiling is nothing more than a simple measure. During Donald Trump’s presidency, for example, Congress agreed to expand the limit three times, without making cuts like those currently needed. During the Biden administration, it was actually raised once, in 2021. In all of these cases, no new cap was put in place, but the cap was suspended for a certain period. After this period, the ceiling was automatically updated according to the debts issued between them.
If Congress and the White House are at odds, the process is not so simple. It is a very divided discussion according to the visions of both sides. In 2011, after winning the House of Representatives, The Republican Party made a series of budget cuts as a condition for approving the debt limit increase during the Barack Obama administration. The deal came at the last minute, but the uncertainty ahead caused chaos in the markets, stocks plummeting and the US credit rating downgraded.
Memories of the 2011 debt crisis are fresh in the White House today: Biden was vice president then. And now he faces a similar scenario, with Republicans demanding budget cuts as a condition of passing a new cap. In this case, we must add to the partisan divisions also the great internal disagreements between the two major political forces in the United States.
The main differences
The White House complains that “any serious budget negotiations must include discussions of spending and revenue, but Republicans have refused to discuss revenue.” They focus on hurting American workers rather than consider the president’s proposal to cut unnecessary spending and Reducing the deficit by removing subsidies from oil and pharmaceutical companies and making the rich pay their fair share“.
One of the Republicans’ main demands is to add new “work requirements” to the government’s social programs. That is, the labor-related conditions that must be met by persons who wish to receive certain benefits from the state. For example, The government’s recently approved budget bill requires those who want access to Medicaid, the government-funded healthcare program, to work or perform community service..
These new requirements, which would affect lower-income sectors above all, are unacceptable to the more progressive wing of the Democratic Party. a A group of 66 Democratic members of Congress He asked Biden for the subpoena The Fourteenth Amendment to the United States Constitution, which provides that the “validity of the public debt” of the North American country “shall not be questioned”. For this category, the debt ceiling “contradicts” this constitutional mandate. “I think that [la enmienda] It should be on the table. “I think the grounds are legitimate,” the congresswoman told him recently. Alexandria Ocasio-Cortez on the gate Politician.
How are the negotiations going?
Halfway through the negotiations, Biden flew to Japan during the week for the G7 meeting in Hiroshima. The US President will return to Washington on Sunday evening, after cutting short his tour, which was scheduled to include visits to Papua New Guinea and Australia.
And despite last week’s House Speaker McCarthy optimism that he believes a deal will be reached soon, There is no clear progress in the negotiations. Even if the two sides reach an agreement this week, the timeline appears too tight for both chambers to vote on a law before early June. It is also not clear what is the actual deadline by which the government could run out of money.
The only thing that seems more certain are the possible outcomes. No deal makes everyone happy, especially the extremists on both sides. This is what the Democratic majority leader in the Senate predicted, Charles Schumer: “Nobody will get everything they want.”