The president of the United States, Joe Biden, and the president of the House of Representatives, Kevin McCarthy, will meet this Monday to continue negotiating the raising of the debt ceiling, as stated by the parliamentary leader. McCarthy has explained that he had a “productive” call with Biden this Sunday. The president has called him from Air Force One, the presidential plane, in which he was returning from Japan from the G7 meeting, the group of seven major developed countries.
“Time is pressing,” McCarthy has said. Negotiations resume this Sunday. Representative Garrett Graves, one of the Republican negotiators, has indicated that spending levels will be a “fundamental” point of the talks. Biden already announced that he was canceling part of his Asia-Pacific tour to face the negotiations. It was not initially clear if the rest of the Congress leaders will be present at the meeting, as in previous meetings. The White House has confirmed that in the call a meeting has been agreed for this Monday.
Earlier, in Hiroshima, Biden had referred to the matter at length in his press conference at the end of the summit. Biden’s concern is that the most extreme Republicans are willing to cause the United States to default on its obligations in order to pass the political bill on it. “As for the merits based on what I have offered, I would not be at fault. As for politics, no one would be blameless. And by the way, that’s one of the things that some are contemplating,” he said.
“I think there are some MAGA Republicans in the House who know the damage it would do to the economy. And since I’m president, and presidents are responsible for everything, Biden would take the blame. And that is the only way to ensure that Biden is not re-elected, ”he added.
By MAGA Republicans, Biden is referring to supporters of former President Donald Trump and his slogan (Make America Great Again). Trump himself has expressed his support for causing a default if Biden does not accept the massive cuts that the Republicans want to impose on him, despite the catastrophic economic consequences that he would have, according to experts.
McCarthy won the election as speaker of the House of Representatives on the 15th ballot after making concessions to that extremist group, to which he is held hostage to some extent, making an agreement difficult. “Now is the time for the other side to move from their extreme positions, because much of what they have already proposed is simply, frankly, unacceptable,” Biden said in Hiroshima. “I can’t guarantee they won’t force a default by doing something outrageous. I cannot guarantee that ”, he added.
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On the other side, it is McCarthy who accuses the Democrats of extremism: “President Biden does not believe there is a single dollar of savings [adicional posible] in the federal government budget. He would rather be the first president in history to default on the debt than risk upsetting the radical socialists who are calling the shots for the Democrats right now.” he tweeted this Saturday.
In an interview with NBC’s Meet the press television program, Treasury Secretary Janet Yellen insisted on the need to resolve the problem soon: “I indicated in my last letter to Congress that we hope we will not be able to pay all our invoices in early June and possibly as early as June 1. And I will continue to report to Congress, but I certainly haven’t changed my assessment. So I think it is a hard limit ”, she has stated when asked if that date could be flexible. “There is always uncertainty about tax revenue and spending, so it is difficult to be absolutely certain about it, but my assessment is that the chances of reaching June 15 and being able to pay all our bills are quite low,” he added. .
The fact that the United States Government does not have funds to meet all its obligations does not necessarily imply defaulting on the debt from the beginning. The Treasury can give priority to those payments whose non-compliance would have greater side effects over others. There are also some theoretical alternatives to obtain extra financing (from issuing a high-denomination platinum coin to playing with the face value and interest of the debt), but all have contraindications.
Neither Biden nor Yellen have been in favor this Sunday of using one of those possible shortcuts: invoking the fourth section of the 14th Amendment to the Constitution, which says that “the validity of the public debt of the United States, authorized by law (. ..) shall not be questioned”. The president of the United States believes that it is a very risky maneuver that can be revoked by the courts: “I think we have the authority. The question is: could it be done and invoked in time that it could not, was not appealed and, as a consequence, the date in question passed and still defaulted on the debt? ”, He pointed out in Hiroshima. This does not mean that the president does not consider it for the future and he has expressed his intention to find a way to present the validity of this route to the courts, but once the current crisis has been overcome.
Still, Biden has been confident of the chances of a deal: “The United States has never defaulted…it has never defaulted on our debt, and it never will,” he said, glossing over a 1979 default that was for reasons techniques. In the previous debt ceiling crisis, in 2011, with Barack Obama as president and Biden as vice president, an agreement was reached close to the limit, but the debt did not default. “It would be a very serious circumstance if we did not pay our debt for the first time in 230 years. It would be a serious problem ”, he said in Hiroshima.
Meanwhile, the fact that the word default is pronounced over and over again already has consequences and it shows in the interest rates of the debt in the markets. The Council of Economic Advisers of the White House published a report according to which the blockade threat is already having an effect; a default episode, however short, would leave a costly bill, and a prolonged default would drop gross domestic product by 1.5% in the third quarter (at an annualized quarterly rate of 6.1%) and raise the interest rate. unemployment five points, destroying 8.3 million jobs.
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