USA threatens to default
Biden and McCarthy with crisis talks in the debt dispute
May 21, 2023 at 9:41 p.m
The Biden administration and Republicans have been arguing about raising the debt limit for months. Without an agreement, the USA could become insolvent for the first time in its history at the beginning of June. Now it comes to the crisis summit.
In the US debt dispute, President Joe Biden and Republican House Speaker Kevin McCarthy are meeting on Monday for crisis talks aimed at preventing the country from defaulting. Both sides announced this in Washington. “My position has not changed,” McCarthy said on Twitter. The government cannot “continue to spend money that we don’t have”. For his part, Biden dismissed the Republicans’ demands as “unacceptable”.
For her part, US Treasury Secretary Janet Yellen again urged an end to the debt dispute between the government and the Republicans on Sunday. If the debt ceiling is not raised before June 1, the US government will soon no longer be able to pay its bills, Yellen warned on US television network NBC. “We expect that we will not be able to pay all our bills as early as June, possibly even as early as June 1,” said the finance minister. “I think that’s a firm deadline.”
Biden, for his part, once again described the demands of the Republicans as “unacceptable”. At the same time, however, he said that a compromise would still be possible before a default.
“Do not question legal validity”
Among other things, the President is considering invoking the 14th Amendment of the US Constitution, according to which “the legal validity of the national debt of the United States (…) shall not be called into question”. With that, the president could potentially bypass Congress and raise the debt ceiling himself. However, his Finance Minister Yellen was skeptical about such a possible step and referred to the legal uncertainty.
Biden’s government and the opposition Republicans have been arguing for months about raising the debt ceiling. Without an agreement, the United States faces the risk of default for the first time in its history, with potentially devastating economic and financial consequences far beyond the country.
Because of the dispute, Biden, who was attending the G7 summit in Hiroshima, Japan until Sunday, canceled his subsequent visits to Papua New Guinea and Australia. Instead, an immediate flight back to Washington was scheduled.
Republicans only want to approve a debt ceiling hike in exchange for billions in government spending cuts. They want to take back key elements of Biden’s reform policy. The President strictly rejects this. He accuses the opposition of taking the country’s economy “hostage” with the threat of non-payment in order to push through their political agenda.