US default: Finally, a settlement in sight?
President Joe Biden was quite “optimistic” at the end of the afternoon, saying he hoped “by tonight we’re able to reach an agreement”. “We are close (to an agreement) but it is not done yet,” said a source close to the discussions raising doubts about the possibility of an announcement on Friday. Progress was noted by Speaker of the House of Representatives Kevin McCarthy, the main Republican protagonist of this political-financial soap opera. But “nothing is certain until everything is agreed,” he said, vowing to keep up the pressure on the president. There is no lack of pressure in this case, which is difficult to understand outside the United States and generally outside the Washington bubble.
The date on which the US Treasury will find itself unable to honor its financial commitments has been refined, now set for June 5 as against June 1, offering a few days of respite. “Based on the most recent available data, we now estimate that if Congress does not raise or suspend the debt ceiling by June 5, the Treasury will not have sufficient resources to meet the government’s obligations.” , detailed On Friday, US Secretary of the Treasury Janet Yellen wrote a letter to elected officials of Congress.
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More than $130 billion is expected in the first two days of June in pensions, health and ex-servicemen payments in particular, which would “leave the Treasury with extremely short resources”, she said. accurate.
The challenge is to get Congress – the Republican House and the Democratic Senate – to vote quickly to raise the public debt limit, otherwise the United States could find itself in default, an unprecedented situation with potentially devastating economic, financial and social implications.
This parliamentary maneuver has long been a formality for both the parties. But this time Republicans demand, in exchange for their green light, a reduction in public spending. Officially, Joe Biden refused to negotiate, believing he was being held “hostage”.
In fact, advisers from the two camps have been talking non-stop for several days and have already agreed on some key points, according to several US media. The compromise would freeze some spending but without affecting budgets devoted to defense and veterans, report the New York Times and Washington Post, for example. It will be deferred for two years, until the risk of default, after the next presidential election.
Each camp wants to limit the damage at the political level.
Kevin McCarthy, who needs to assert his stature as Speaker of the House, could claim to instill more budgetary austerity, while Democrats would claim to protect social benefits or major investment projects. The US president, campaigning for re-election, made it clear on Thursday that “two opposing approaches” were at work in these discussions. He projected himself as a champion of social and financial justice. But according to the press, the 80-year-old Democrat would have abandoned these negotiations in order to increase the funds devoted to the fight against tax evasion.
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If a compromise is found, it would still have to be adopted by the Senate, which is narrowly controlled by Democrats, and the House of Representatives, in which conservatives hold a fragile majority. The parliamentary calendar is constrained: on the occasion of the extended “Memorial Day” weekend, many elected officials return to their strongholds for a break of several days.
Furthermore, some progressives within the Democratic Party, such as some elected members of the Republican Party, have threatened not to ratify it, or to delay it as much as possible, thereby making too many concessions to the opposing camp. IMF Managing Director Kristalina Georgieva said on Friday that finding a solution was “essential” for the global economy, while stressing that the United States must do “more to reduce the public debt”.