US President Joe Biden reaffirmed on Tuesday that a default on the United States government debt is “not an option” and that after a meeting he had with the Republican opposition ended with no resolution to the ongoing dispute over raising the national debt ceiling. but the parties agreed to hold a new meeting in three days.
Biden did not rule out canceling his visit to Japan if the US debt ceiling crisis continues.
Republican House Speaker Kevin McCarthy and Senate Minority Leader Mitch McConnell met Biden at the White House in a new chapter of a power struggle that threatens the world’s biggest economic power with disastrous consequences.
The meeting was attended by House Minority Leader Hakim Jeffreys and Senate Democratic Leader Chuck Schumer.
Leaving the White House, McCarthy said no progress had been made.
And raising the debt ceiling is a legislative maneuver that allows the world’s largest economy to continue paying its bills and debts to its creditors and the wages of its workers.
The debt ceiling was set at $31 trillion, a record for all sovereign debt in the world in absolute terms.
Republicans condition the agreement on raising the debt ceiling in exchange for budget cuts.
According to Jeffreys, after the meeting, “radical” Republicans signaled that they were ready to push us towards a “default.”
He called the issue “reckless, irresponsible and extremist”.
In 2011, the US faced a similar situation, leading to a downgrade in its credit rating.
“It is clear that the gap between the position of the president and the position of the Republicans is huge,” Treasury Secretary Janet Yellen said. A source close to the case told Agence France-Presse that a meeting was held with the managers of the American company.
Time is running out
McConnell assured the press after the meeting that “the US will not default on its debt” but emphasized that “time is running out.”
For her part, White House press secretary Karen Jean-Pierre said it was a constitutional duty that Republican lawmakers take action to raise the national debt ceiling.
She urged Republicans to “unconditionally” raise the national debt ceiling.
But McCarthy reaffirmed on Tuesday that Republican representatives are doing their job by drawing up a plan to raise the national debt ceiling with budget cuts, accusing Biden of holding the country “hostage.”
And about forty Republican senators said at the end of the week: “We will not vote for a text that raises the national debt ceiling without fundamental reforms in the budget and public spending.”
This political impasse is not the first, as doubts about the possibility of raising the national debt ceiling have been prevalent since the era of President Barack Obama. The current situation causes a lot of fluctuations in the markets.
Wall Street opened lower on Tuesday morning, with Oxford Economics noting in a note that investors are “avoiding U.S. debt maturing in June, July and August.”
Sovereign credit default swaps, which are financial swap agreements in which the seller compensates the buyer in the event of a loan or other credit default, have reached all-time highs, signaling growing unease in the financial world.
31 thousand billion
To remove the risk of a default that didn’t exist before, Biden needs to convince some of the Republican members of the Senate due to the lack of a sufficient majority of Democrats in the House.
But above all, the US president needs to find common ground with the Speaker of the House of Representatives.
The two men play an important role, and it’s not just about raising the debt ceiling, it’s also about their political credibility.
Biden, who is 80, is running for a second term and has so far been unable to raise his level of support. As for McCarthy, he was narrowly elected Speaker of the House of Representatives with a narrow majority and must therefore work to maintain his position.
And a recent Gallup poll showed that Americans don’t have much confidence in the leaders of the two major parties on economic issues. According to the poll, 35 percent of Americans trust Biden and 38 percent trust the Republican Party.
If the stalemate continues beyond June 1, the administration believes the United States will be unable to pay its bills and salaries, and unable to pay its creditors.
Thus, for the first time, holders of US Treasury bonds will not be able to return their investments.
Therefore, the White House argues that if the recovery period, which the president attributes to himself, ends, the markets will collapse, the recession will become historic, and unemployment in the US will rise strongly with consequences for the entire global economy.
