May 22, 2023, 1:47 PM
May 22, 2023, 1:47 PM
President Joe Biden and Kevin McCarthy, his main Republican opponent on the debt ceiling, will resume negotiations on Monday for a quick agreement and avoid a dangerous default of the United States.
Biden, who has just returned from Japan where he attended the G7 summit, will receive the Republican leader of the House of Representatives at the White House at 21:30 GMT.
The teams of one and the other have already resumed the conversations that had soured over the weekend.
A telephone conversation was necessary between the president and congressman to untangle the situation a bit.
The two spoke on Sunday, as Biden flew back to Washington. McCarthy described the conversation as “productive”, according to US media.
This is the first positive sign after an acrimonious meeting between Democratic and Republican negotiators on Friday at the White House, although without Biden, who was on his way to Hiroshima, Japan.
Republicans demand lower public spending. The Biden administration refuses and proposes for its part to reduce certain expenses and increase taxes on the richest and on companies that today benefit from tax refunds.
Republicans fervently object to any tax increase.
“Washington can’t keep spending the money it doesn’t have”MacCarthy tweeted.
Biden warned him that he would reject a deal “that protects billions of dollars in subsidies to Big Oil while jeopardizing the health care of 21 million Americans.”
“America has never defaulted on its debts. And that will never be the case,” Biden said.
However, that may be the risk if no agreement is reached.
This unprecedented situation, with potentially catastrophic consequences for the economy of the United States and the world, could occur as of June 1.
The United States may then be unable to repay US Treasury bond holders., king of world finance. Likewise, the government could not pay some salaries to officials or veterans’ pensions, among others.
A decision made at the last minute could also have consequences. In 2011, there was only the threat of bankruptcy and this caused, for the first time, the United States to lose its precious triple A credit rating, the best of rating agencies.
Concrete effects are already being felt, Treasury Secretary Janet Yellen warned on Tuesday. “Investors have become more reluctant to hold sovereign debt due in June,” she said.
Meanwhile, the shadow of Donald Trump rests on the negotiations. The former Republican president, who maintains strong influence, urged his party on May 10 to refuse to raise the debt limit, which would trigger default, if Democrats do not agree to cut spending.
On Sunday, White House spokeswoman Marine Jan-Pierre deplored the “extreme partisan demands” put forward by conservatives.
McCarthy, for his part, accused the “left wing of the Democratic Party” to be “at your command.”
If disagreements persist, Biden has one recourse left: invoke the 14th Amendment to the US Constitution, which stipulates that “the validity of the public debt of the United States, authorized by law, (…) must not be questioned”.
In other words, the expenses already voted must be able to be paid.
Despite considering this possibility, Biden was skeptical, while Yellen also alluded to “legal uncertainty” and a “tight deadline.”
Like almost all major economies, the United States lives on credit. However, in the United States it is the prerogative of Congress to vote to increase the public debt ceiling that the world’s leading economy is authorized to accumulate.
And what was initially a formality has now become a political battle.
