The President of the United States, the Democrat Joe Bidenand the Republican leaders of Congress, closed without an agreement on Tuesday a new meeting that sought an understanding to increase the debt issuance limit and avoid a default that would have serious effects on the national and global economy.
After the meeting, Biden said he was “optimistic that there is a path to a responsible bipartisan budget agreement if both sides negotiate in good faith,” the White House said in a statement. But for Kevin McCarthy, leader of the Republican majority that controls the House of Representatives, there is “a lot of work” to do.
The appointment lasted less than an hour. Before, Biden, the vice president Kamala Harris and opposition leaders posed for the cameras in the Oval Office of the White House.
In a sign that the talks are difficult, Biden will cut a major trip to Asia this week short and return to Washington on Sunday to continue negotiating with Republicans, according to two sources familiar with his agenda.
The US president thus cancels trips to Australia and Papua New Guineabut intends to attend the next G7 meeting in Japan, added the sources, who requested anonymity.
Democrats and Republicans do not agree on this increase in the debt issuance capacity of the United States, despite the fact that it is essential for the country to honor its payments to creditors, suppliers, pay salaries of public officials and pensions.
Raising the debt issuance limit is usually a routine procedure in the country, which has used this system for decades.
But this time the congressmen do not agree because neither party wants to give up.
Republicans refuse to authorize an increase or suspension of the debt ceiling unless the government agrees to draconian cuts in public spending.
“Millions of jobs”
President Biden is opposed but is aware that “default is not an option.”
“If House Republicans push us into bankruptcy, 8 million jobs could be lost, destroying our economic progress,” he wrote on Twitter before the meeting on Tuesday.
This tug of war threatens to cause serious problems for the world’s largest economy.
The country exceeded the maximum limit of public debt in January, which is 31.4 trillion dollars, and since then extraordinary measures have been applied that only allow it to meet obligations for a while.
Thus, the United States could enter default on June 1 if an agreement is not reached in Congress, Treasury Secretary Janet Yellen warned again on Monday, based on “additional information now available.” She had already anticipated it at the beginning of May.
“If Congress fails to raise the debt ceiling before default, we will enter a recession and it will be catastrophic,” Wally Adeyemo, Treasury Undersecretary, warned once again on CNN.
“reluctant” investors
The situation has led to Biden to “consider the 14th Amendment,” which makes the debt ceiling unconstitutional but carries legal complications of which the president claims to be aware.
Analysts consider other possibilities, such as a short-term increase or outright suspension of the debt limit, as more likely scenarios.
In 2011, disagreements between Democrats and Republicans over raising the debt ceiling was one reason the country temporarily lost its top credit rating, the coveted “AAA.”
Currently the country is already paying the consequences of the political crisis, according to Yellen. Investors have become more “reluctant to hold sovereign debt due in June,” she said in a speech planned for Tuesday before the Independent Community Bankers Association of America (ICBA).
The interest rate on one-month US Treasury bonds rose on Monday to 5.74%, the highest in at least 20 years, from 3.29% in mid-April.
The central bank’s benchmark rate is currently in a range of 5.00% to 5.25%.
But a default on USA It would also “have very serious repercussions” on the global economy, Julie Kozack, director of communications for the International Monetary Fund (IMF), said at a press conference last week. Kozack warned that a moratorium would lead to higher rates and greater instability.
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