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US President Joe Biden met with Republican House Majority Leader Kevin McCarthy on Monday to reach an agreement on raising the debt ceiling. The discussion was “productive” but did not lead to an immediate solution, while a default of payment from the United States is looming in ten days.
D-10. While the threat of an American default looms, Joe Biden and opposition leader Kevin McCarthy wanted to believe Monday, May 22, in a way out of the crisis, but their disagreements have not yet been overcome.
“I have just completed a productive meeting” with the Republican boss of the House of Representatives, said the American president in a statement, calling for negotiations “in good faith” to find a budget compromise. He acknowledged the persistence of “differences” that the teams of the two men will have to iron out, in a very short time.
Treasury Secretary Janet Yellen recalled the stakes of the meeting well, emphasizing on Monday, once again, that it was “very likely” that the United States would find themselves short of public money after June 1.
The American president assured, when receiving the head of the House of Representatives in the Oval Office, that he was “optimistic” about the possibility of a “breakthrough” at the end of the meeting.
“We have no agreement but a productive discussion in the areas where we have differences of opinion”, estimated Kevin McCarthy at the end of the meeting. “I think the tone tonight was better than any time before,” he added, but “we still have philosophical differences.”
The two men, who have already seen each other twice in two weeks with other parliamentary leaders, met face-to-face this time. This summit meeting aimed to relaunch discussions at the level of the teams of advisers, which had frankly turned sour this weekend, in the absence of Joe Biden.
The 80-year-old Democrat, who returned from the G7 summit in Japan on Sunday, had originally planned to extend his diplomatic tour of Oceania, but the political-budgetary imbroglio in Washington forced him to cut short his trip.
To remove the risk of bankruptcy, Congress – the Senate held by the Democrats and the House with a Republican majority – must vote to raise the maximum authorized public debt ceiling. The Republicans require, to give their green light, a sharp reduction in public spending. Joe Biden, who is campaigning for re-election in 2024 on a social justice pledge, opposes it.
Asked about CNN before the meeting, Kevin McCarthy wanted to be rather optimistic, assuring that “what we have negotiated will be seen by a majority of Republicans as the right solution to get us back on the right track”. The American president told him on Monday that he was certainly in favor of a reduction in the deficit, but that it was necessary “to take an interest in the tax loopholes and to ensure that the rich pay their fair share” of taxes.
The “debt ceiling”, more than 31 trillion dollars – a record in the world – was reached several months ago, but the federal government has so far managed the situation through accounting arbitrations.
In the event of default, the United States would no longer be able to repay holders of Treasury bills, this king of global finance investments. The government could also no longer pay certain salaries of civil servants, nor pensions for veterans, among others. The consequences for the US and global economy would be catastrophic, many economists warn.
So, who will give in first? The American president, who knows well that a recession, whatever its political genesis, would compromise his chances of re-election? Or Kevin McCarthy, whose position depends on a handful of radical elected officials, who call on him – like former President Donald Trump – not to “bend”?
The left wing of the Democratic Party is pushing Joe Biden to force his way through by invoking the 14th amendment to the American Constitution, which prohibits “questioning” the solvency of the first world power.
In this case the government would issue new loans, as if the debt ceiling did not exist. This strategy is however fraught with legal dangers, especially when one faces like Joe Biden a Supreme Court firmly anchored on the right.