Joe Biden at a press conference after the G7 in Hiroshima on May 21, 2023. (/Brendan Smialowski)
Joe Biden and Kevin McCarthy, his main Republican opponent on the debt ceiling, will resume discussions on Monday after a weekend of blocking, in an attempt to quickly find an agreement and avoid a dangerous default in payment by the United States.
The American president, just returned from Japan where he participated in the G7 summit, is due to receive the Republican leader of the House of Representatives on Monday.
The two spoke to each other on Sunday as Joe Biden was on his plane to return to Washington. Kevin McCarthy spoke of a “productive” discussion, according to American media, indicating that the teams of the two camps have, in the process, resumed discussions.
This positive signal is the first since, on Friday, a meeting between Democratic and Republican negotiators, at the White House but without Joe Biden, already on his way to Hiroshima, turned sour.
The US debt ceiling (AFP/)
Because the Republicans require, to give their green light, a reduction in federal spending. The Biden administration refuses, and proposes for its part to reduce certain expenses while increasing taxes for the richest and companies.
“Washington can’t keep spending money we don’t have,” Kevin McCarthy tweeted.
Joe Biden warned him that he would refuse a deal “that protects billions (of dollars) in subsidies for big oil companies while endangering the health care of 21 million Americans. Or that protects wealthy tax cheats while endangering food aid for one million Americans.”
– Concrete effects –
“America has never defaulted on its debts. And it never will,” assured the American president.
A sign in Washington on May 19, 2023 (AFP/Mandel NGAN)
But that is what is likely to happen if no agreement is reached. This unprecedented situation, with potentially catastrophic consequences for the American economy, and even the world, could occur as early as June 1.
The United States could then no longer be able to reimburse the holders of American Treasury bonds, the king of investments in global finance. The government could also no longer pay certain salaries of civil servants, nor pensions for veterans, among others.
Even a decision taken at the last minute would have consequences. In 2011, it was the only threat of bankruptcy which had, for the first time, caused the United States to lose their precious triple A, the best credit rating from the rating agencies.
Concrete effects are already being felt, Treasury Secretary Janet Yellen warned on Tuesday, stressing that investors are “more reluctant to hold sovereign debt that matures in June”.
– Shadow of Trump –
And the shadow of Donald Trump hangs over these negotiations. The former Republican president on May 10 urged the Republicans, over whom he retains immense influence, to “cause a default” if the Democrats do not accept “massive cuts” in spending. And on Friday, he called on them to “not bend”.
Kevin McCarthy during a press briefing outside the White House on May 16, 2023 (AFP/Mandel NGAN)
On Sunday, White House spokeswoman Karine Jean-Pierre, deploring the “extreme partisan demands” proposed by the conservatives, pointed the finger at Republican officials, under the thumb of those close to Donald Trump according to her.
Opposite, Kevin McCarthy had for his part accused “the left wing of the Democratic Party” of being “in control”.
If the disagreements remain too deep, Joe Biden would still have one card left: the 14th Amendment to the American Constitution, which provides that “the validity of the public debt of the United States (…) must not be questioned “, and therefore makes it possible to pretend that the debt ceiling does not exist.
While indicating that he was studying this possibility, Joe Biden was however skeptical, and Janet Yellen also spoke of “legal uncertainty” and a “tight deadline”.
Like almost all major economies, the United States lives on credit. But, it is an American peculiarity, it is the prerogative of Congress to vote to raise the maximum amount of public debt that the world’s largest economy is authorized to accumulate.
And what was initially only a formality has now become the stake of a real political battle.
© 2023 AFP
Did you like this article ? Share it with your friends with the buttons below.
