June 24, 2024

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US Default: Hopes for Political Agreement Grow

US Default: Hopes for Political Agreement Grow

Finally a deal in sight? The White House and negotiators continued Friday to work out a politically motivated compromise to avoid a U.S. default, though it could happen on June 5 instead of June 1.RProvides a short additional delay.

• Read more: US Debt: Biden Promises “There Will Be No Default”

“We are close [d’un accord] But it has not been done yet,” said a source close to the discussions, casting doubt on the possibility of an announcement on Friday.

“We made progress yesterday, and I want to make progress again today,” said House Speaker Kevin McCarthy, the main Republican protagonist of this political-finance soap opera.

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

There is no shortage of pressure on this issue, which is difficult to understand outside the US and outside the Washington bubble in general.

However, the date on which the US Treasury will be unable to meet its financial obligations has been moved to June 5 as opposed to June 1.R Before June, it gave a few days’ respite.

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

He clarified that more than $130 billion in pensions, health care and especially payments to veterans are slated for the first two days of June, which will “leave the Treasury with very limited resources.”

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“Hostage”

The challenge is getting Congress — the Republican and Democratic Senate — to vote quickly enough to raise the public debt ceiling, otherwise the U.S. could find itself in default, an unprecedented situation with economic implications.

This parliamentary maneuver has long been a ritual for both parties. But this time Republicans are demanding cuts in public spending in exchange for their green light.

Officially, Joe Biden refuses to negotiate and believes he is being held “hostage.” In fact, advisers from both camps have been talking non-stop for days and, according to several US media outlets, have already agreed on some key lines.

Reportedly, the deal would freeze some spending but leave the defense and veterans budgets untouched. The New York Times Where The Washington Post.

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

Reduce debt

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

Kevin McCarthy, who needs to cement his status as House speaker, can be credited with pushing for more budget austerity, while Democrats will say he protected social benefits or big investment projects.

The US president, campaigning for re-election, explained Thursday that “two opposing visions” are at work in these debates.

He presented himself as a champion of social and financial justice. But according to the press, the 80-year-old Democrat, in talks with Republicans, has given up on increasing the amount of resources dedicated to the fight against tax evasion.

If a deal is found, it still needs to be approved by the Senate, narrowly controlled by Democrats, and the House of Representatives, where conservatives have a weak majority.

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The parliamentary calendar is constrained: With the “Memorial Day” extended weekend, many elected officials have returned to their strongholds for a multi-day break.

In addition, some progressives in the Democratic Party have threatened to either not approve or delay as long as possible a text that would make too many concessions to the opposing camp, as have some elected representatives of the Republican Party.

Joe Biden and McCarthy will have to play the center to rally a majority of lawmakers in each party, a particularly difficult exercise in a country where political divisions have widened significantly in recent years.

IMF Managing Director Kristalina Georgieva on Friday called for “a resolution as soon as possible”, saying that addressing the global economy was “priority”, but stressed that the US must do “more to reduce the public debt”. .