US debt discussions continue between Biden and Republicans

No progress but discussions continue and the default is “not an option”: Joe Biden and Republican leaders in Congress stand by their positions on a increase to country borrowing limitbut they will continue to speak for try to avoid a default on the world’s largest economy.

For the president, the scenario of the United States defaulting on its obligations to its creditors due to a lack of capacity to issue debt “is not an option.”

“I did not see any movement,” summed up the leader of the opposition majority in the House of Representatives on his side, kevin mccarthyafter meeting at the White House with the president, in a meeting in which the leader of the opposition minority in the Senate also participated, mitch mcconnellin addition to the main Democratic legislators, Hakeem Jeffriesminority leader in the lower house and the principal of the Senate, Chuck Schumer.

On Friday there will be a new meeting between the two parties, McCarthy said. But for now, both sides accuse each other of taking the economy “hostage”.

Biden told the press on Tuesday that he could cancel his Asian tour scheduled for the end of the month if there is no agreement on this thorny debt issue by then.

Democrats and Republicans do not agree on the increase in the debt ceiling of the United States, essential for the country to honor its payments, avoid a default, pay salaries of public officials, pensions and suppliers.

Republicans refuse to approve an increase or suspension of this cap unless the government agrees. draconian cuts in public spending. Biden does not want to link the two issues.

Raising the debt issuance ceiling, which allows the government to pay expenses, is usually something common in the United States, where this system has been in place for decades and is a springboard for Congress.

However, increasing the current maximum, which is 31.4 trillion dollars and was already surpassed in January, turned into a war that pits the White House against Republican congressmen, who They demand cutting spending and reducing the fiscal deficit as a condition for authorizing greater federal government borrowing.

In 2011, the quagmire led to the United States temporarily losing its coveted “AAA” debt rating.

This year, McCarthy and his GOP decided to say “No” to raising the debt ceiling, unless Democrats first agree to drastic budget cuts.

It’s a race against time. On Sunday, Treasury Secretary Janet Yellen warned that if Congress does not quickly resolve the matter, “financial and economic chaos would break loose.”

“Clearly the distance is immense between the position of the president and that of the Republicans,” Yellen said later soberly on Monday.

Democrats refer to the House Republican plan to raise the debt limit with budget cuts as the “default law.”

And in the Senate a clash is also being prepared, since 43 Republicans signed a letter to Schumer over the weekend expressing their collective commitment to oppose raising the debt ceiling “without substantial spending and budget reform.”

A failure to reach a solution may not only send up a storm on Wall Street, but also impact Biden, campaigning for his re-election in 2024.

Wall Street closed slightly lower on Tuesday, and analyst firm Oxford Economics said in a note that investors “avoid US debt maturing in June, July and August.” Some titles called “Credit Default Swaps”, a kind of insurance against the risk of default, are exchanged at historically high levels, one more indicator of the restlessness that reigns in the financial world.

“The debt ceiling is worrisome but investors have already seen this movie. In general, it ends well.” Steve Sosnick, of Interactive Investment, qualified aside, summarizing the market sentiment.

It is not yet clear if the government will run out of funds to pay its debts. Last week the Treasury warned that this could happen on June 1.

Treasury payments could be halted for a few days until tax season revenue increases in mid-June.

The Americans see this wrestling as spectators and do not seem to take sides for either side. A Gallup poll shows that on economic matters only 35% trust Biden, and 38% trust the Republican leadership.

(With information from AFP)

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