US President Joe Biden confirmed on Tuesday that defaulting on the public debt of the United States is “not an option” and that after a meeting he held with the Republican opposition ended without reaching any solution to the ongoing dispute over raising the public debt ceiling, but the parties agreed to hold a new meeting after Three days.
Biden did not rule out canceling his visit to Japan if the US public debt ceiling crisis continues.
Republican US House Speaker Kevin McCarthy and Senate Republican Minority Leader Mitch McConnell met Biden at the White House, in a new chapter of a power struggle that threatens the world’s largest economic power with catastrophic consequences.
House Minority Leader Hakeem Jefferies and Senate Democratic Leader Chuck Schumer participated in the meeting.
Upon leaving the White House, McCarthy said that no progress had been made.
McCarthy and McConnell speak to the media after meeting with Biden
And raising the “debt ceiling” is a legislative maneuver that allows the largest economy in the world to continue paying its bills and dues to its creditors and wages to its employees.
The debt ceiling has been set so far at $31 trillion, which is 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.
After the meeting, Jeffreys said, “radical” Republicans have indicated they are willing to push us into “default.”
He described the matter as “reckless, irresponsible and extremism”.
In 2011, the United States faced a similar situation, which led to a downgrade of its credit rating.
During a meeting with Biden
“It is clear that the gap between the position of the president and the position of the Republicans is huge,” said Treasury Secretary Janet Yellen. A source close to the file told Agence France-Presse that it held a meeting with American company managers.
Time is running out
McConnell assured the press after the meeting that “the United States will not default on its debt,” but stressed that “time is running out.”
For her part, White House spokeswoman Karen Jean-Pierre said that the constitutional duty dictates that Republican lawmakers take action to raise the debt ceiling.
She called on Republicans to raise the debt ceiling “unconditionally”.
But McCarthy confirmed on Tuesday that Republican representatives are fulfilling their responsibilities by drawing up a plan to raise the public debt ceiling that provides for budget cuts, accusing Biden of taking 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 debt ceiling without fundamental reforms in the budget and government spending.”
This political impasse is not the first, as doubts about the possibility of raising the debt ceiling had prevailed during the era of President Barack Obama. The current situation raises a lot of fluctuations in the markets.
On Tuesday morning, Wall Street opened lower, and Oxford Economics noted in a note that investors “are avoiding US debt due 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, are at historic highs in a sign of growing concern in the financial world.
31 thousand billion
In order to remove the risk of default, which did not happen previously, Biden needs to convince part of the Republican members of the Senate, due to the lack of a sufficient majority of the Democrats in the House.
But above all, the US president needs to find common ground with the Speaker of the House.
The two men play an important role, and it is not only about raising the debt ceiling, but also about their political credibility.
Biden, who is eighty, is running for a second term and has not yet been able to raise his support rate. As for McCarthy, he was hardly elected speaker of the House of Representatives by obtaining a narrow majority, and therefore he must work to maintain his position.
And a recent Gallup poll showed that Americans have no real confidence in the leaders of the two major parties on economic issues. According to the poll, 35 percent of Americans trust Biden, while 38 percent trust the Republican Party.
If the stalemate continues after June 1, according to the administration, the United States will find itself unable to pay bills and salaries, and also unable to pay its creditors.
Thus, it will be the first time that holders of US Treasury bonds will not be able to recover their investments.
Therefore, the White House asserts that if the recovery period for which the president takes credit for himself ends, the markets will collapse, the recession will be historic, and unemployment will rise strongly in the United States, with consequences for the entire global economy.