The countdown begins. If an agreement is not reached between Joe Biden and the Republican opposition in the United States before June 1, a political and financial crisis could ensue in Washington. The decision makers actually have ten days to find a compromise and raise (or not) the US debt ceiling.
Decided by Congress, the debt ceiling corresponds to the maximum amount up to which the State can borrow. Set at 31.4 billion dollars, it was reached in mid-January. Since then, the US Treasury has been using accounting tricks to push back as long as possible the day this threshold will be crossed.
“Productive discussion” this Monday
Except that for several days, Republicans and Democrats have not been able to agree to raise it again. The right would prefer budget cuts, which the Biden administration rules out.
A new meeting on Monday between the US president and the Republican leader of the House of Representatives Kevin McCarthy with a view to a compromise did not allow an “agreement” despite “a productive discussion,” the Republican explained to the press.
Towards a forced step?
In the event of default, the United States would no longer be able to pay Treasury bondholders, this king of global financial investments. The government could not continue paying certain salaries of civil servants, nor pensions for veterans, among others.
The consequences for the US and world economy would be catastrophic, many economists warn. Treasury Secretary Janet Yellen insisted again on Monday that it was “very likely” that the United States would run out of public money after June 1.
While Biden said he was in favor of reducing the deficit, he also warned that it was necessary to “address tax loopholes and ensure that the wealthy pay their fair share” of taxes. He option that is not favored by Kevin McCarthy and the Republicans.
The left wing of the Democratic Party pushes the US president by force by invoking the 14th amendment to the Constitution, which prohibits “questioning” the solvency of the world’s leading power. In this case, the government would issue new loans, as if the debt ceiling did not exist.
Source: BFM TV
