Defaulting in America: Hopes for a Political Deal

A deal finally on the horizon? The White House and negotiators on Friday continued to build a compromise rich in political ulterior motives to avoid a US default, which could happen on June 5 instead of June 1.^anywhich provides an additional short delay.

• Also read: US debt: Biden confirms that “there will be no default”

“We are closer [d’un accord] “But it’s not over yet,” said a source close to the discussions, skeptical about the possibility of an announcement on Friday.

“We made progress yesterday, I want to make progress again today,” said the main Republican protagonist of this financial political series, Speaker of the House Kevin McCarthy.

But he added, “Nothing is certain until everything is agreed upon,” to keep pressure on Democratic President Joe Biden.

There is no shortage of pressure on this hard-to-understand issue outside the United States and more generally outside the Washington bubble.

However, the date when the US Treasury will find itself insolvent, which is now set at June 5, has been revised down from June 1.^any June before that, offer a few days of rest.

“Based on the most recent data available, we now estimate that the Treasury Department will not have sufficient resources to meet government obligations unless Congress raises or suspends the debt ceiling by June 5th.” , in a letter to elected officials of Congress.

More than $130 billion in payments to pensions, health, and veterans in particular, is planned for the first two days of June, which “will leave the Treasury with a very low level of resources,” she explained.

“hostage”

The challenge is to get Congress – the Republican House and the Democratic Senate – to vote quickly to raise the public debt ceiling, or else the United States could find itself in default, an unprecedented situation with economic ramifications, potentially financially and socially catastrophic.

This parliamentary maneuver has long been a formality for both parties. But this time, the Republicans are demanding, in return for the green light, a reduction in public spending.

Officially, Joe Biden refuses to negotiate, believing he is being held “hostage.” In fact, the two camps’ advisors have been talking nonstop for days, and according to several American media outlets, they have already agreed on some main lines.

The deal would freeze some spending, but leave the defense and veterans budgets intact, according to reports The New York Times where is the Washington Post.

It will defer for two years, until after the next presidential election, the risk of default.

Debt reduction

Each camp wants to limit the damage at the political level.

Kevin McCarthy, who needs to assert his status as Speaker of the House, could claim to have instilled more budgetary toughness, while the Democrats claim they have protected social benefits or big investment projects.

The US president, who is campaigning for re-election, made it clear Thursday that “two opposing visions” were at work in these discussions.

Pretend to be a champion of social and financial justice. But, according to the press, the 80-year-old Democrat was going to give up, in negotiations with the Republicans, increasing the means intended for combating tax evasion as much as he wanted.

If a deal is reached, it must still be approved by the Senate, which Democrats hold narrowly, and the House of Representatives, where conservatives hold a shaky majority.

The parliamentary calendar is tight: Many elected officials have returned to their strongholds for a multi-day break, marking the extended Memorial Day weekend.

In addition, some progressives within the Democratic Party, such as some elected representatives of the Republican Party, threatened not to ratify or delay as much as possible a text that would make too many concessions to the opposing camp.

So Joe Biden and McCarthy must play in the middle to rally most parliamentarians in each party, an extremely difficult exercise in a country where political divisions have widened dramatically in recent years.

International Monetary Fund Managing Director Kristalina Georgieva on Friday also called for a “solution as soon as possible,” saying a solution was “essential” for the global economy, but also stressed that the United States should do “more to reduce public debt.” .