Tick tock, tick tock. In the United States there are ten days left to avoid a default. The ball is in Congress, which must vote on whether to increase the maximum amount of government debt that the world’s largest economy can accumulate. Because like all great powers, or almost all great powers, the United States lives on credit.
also read : The US is at risk of default: What does that mean?
But Republicans refuse to unconditionally raise this famous ceiling. Above all, they are demanding drastic budget cuts before they give the green light, which the Democrats reject. And each side accuses the other of being responsible for this deadlock. `
This unprecedented situation would have potentially catastrophic consequences for the American and global economy. However, it often happens that last minute offers are concluded.
A call and a meeting
While negotiations seem deadlocked right now, Joe Biden and Republican leader Kevin McCarthy are set to meet in person on Monday.
“My position hasn’t changed, Washington can’t keep spending money we don’t have”began in a tweet on Sunday Kevin McCarthy, the main Republican protagonist on this record, following a court appeal “productive” with the Democratic leader.
“We will see each other in person tomorrow to continue negotiations”he announced, the information was quickly confirmed by the White House.
Discussions resumed later on Sunday at the level of the teams working to resolve the crisis.
Joe Biden warned him in a tweet that he would turn down a deal “This protects billions of dollars in subsidies to big oil companies while jeopardizing the health care needs of 21 million Americans.” Or who’s protecting wealthy tax evaders while jeopardizing food aid for a million Americans?”.
“America has never defaulted on its debt. And it never will be.he then launched in a tweet from his plane taking him back from Japan, where he was attending the G7 summit in Washington.
Joe Biden sharply criticized the proposals in Japan on Sunday “extreme” of the conservative Republican camp and declared: “ A lot of what he has already offered is, frankly, just unacceptable.”convinced, however, that a solution could still be found.
The Red Line
The sticking point: Republicans’ call to bring federal spending back to 2022 levels. A red line for the Democrats.
The Biden administration proposes to cut spending while raising taxes on the wealthy and corporations, who benefit from generous tax breaks today. What the Republicans reject.
If no agreement is reached, the US would not only be unable to pay bills and salaries, but would also be unable to compensate its creditors.
For the first time, holders of US Treasuries, the king of global finance, could not recover their investment. According to Treasury Secretary Janet Yellen, this could happen as early as June 1st.
A recourse to the 14th Amendment?
Janet Yellen has also ruled out the possibility of recourse to the 14th Amendment to the US Constitution, mentioned by Joe Biden, which could theoretically allow bypassing the obligation to raise the cap.
He doesn’t seem able to do that “be used appropriately in these circumstances, given the legal uncertainty involved and given the tight deadline”said Janet Yellen on Sunday.