US President Joe Biden said Friday that Democratic and Republican negotiators are close to reaching an agreement to resolve the debt ceiling crisis, reviving hopes of an imminent end to the risk of default on the world’s largest economy.
Biden told reporters at the White House that the agreement is “very close and I am optimistic,” adding, “I hope that by tonight we will know whether we can reach an agreement.”
Although there are no signs of an imminent official announcement, this is by far the strongest indication that the rift between the two major parties can be resolved and allow the government to borrow and avoid default.
The newspapers “The New York Times” and “The Washington Post” had reported that the potential agreement would freeze some expenses, but without prejudice to the budgets allocated to defense and veterans.
The agreement will allow deferring the risk of default for two years, until the next presidential elections.
According to updated estimates by Treasury Secretary Janet Yellen, this unprecedented scenario for the world’s largest economy to default on its debts could happen as of June 5, after she had previously indicated that it could happen on June 1.
“Based on the most recent data, we estimate that Treasury resources will not be sufficient to meet government obligations if Congress does not raise or suspend the public debt ceiling by June 5,” Yellen wrote to Republican House Speaker Kevin McCarthy.
It said more than $130 billion in payments to retirees, the health sector and veterans are due in the first two days of June, which “leaves the Treasury with a very low level of resources.”
The difficulty of striking a deal appears to be an urgent demand for Republicans to stop benefits such as food subsidies.
And White House spokesman Andrew Bates confirmed that Republicans are willing to risk “more than eight million jobs to get food out of the mouths of hungry Americans.”
In the absence of a political agreement and a vote in the House of Representatives and the Senate, the United States will not only be unable to pay its debts, but also unable to pay the salaries of some official employees or social benefits.
The challenge, besides averting a financial, social and economic catastrophe, is to allow each camp to limit the damage at the political level.
Kevin McCarthy, who needs to consolidate his position as Speaker of the House of Representatives, can boast that he has tightened the budget, while the Democrats will confirm that they have protected social benefits or major investment projects.
McCarthy told reporters that negotiators had “made progress,” but added, “Nothing will be agreed until everything is agreed.”
Two opposing visions
The US president, who is running for a second term, said Thursday that the talks center around “two opposing visions.”
He presented himself as a defender of social and tax justice after he demanded that the richest and big companies pay their “fair share” of taxes, describing the Republicans as the party of great wealth and the party of Wall Street.
But according to the press, the 80-year-old Democrat may have given up, in negotiations with the Republicans, the increase he wanted in the money allocated to combating tax evasion.
If a deal is reached, it must still pass in the Senate, which Democrats control by narrow margins, and in the House of Representatives, where Republicans hold a shaky majority. This will not be an easy task.
On the one hand, because the congressional schedule is tight, a number of members of Congress have gone home across the United States to spend several days on the occasion of the long weekend of Memorial Day.
On the other hand, because some progressives within the Democratic Party, just like some Republican members of Congress, have threatened from now on not to ratify a text that offers many concessions to the rival camp.
So Republican Senator Mike Lee pledged Thursday that he would use “every procedural tool available to block a debt ceiling agreement that does not include fundamental spending reforms,” saying, “I’m afraid we are heading in that direction.”
For their part, Democratic members of the Senate asked the president to invoke the Fourteenth Amendment in the Constitution, which prohibits questioning the “solvency” of the United States and enables him to act as if the debt ceiling did not exist in the first place, to continue issuing debt even if an agreement was not reached. Which the White House categorically opposes, to the chagrin of the progressive camp.
Consequently, Biden and McCarthy will have to adopt centrist diplomacy to gather the support of the largest possible number of parliamentarians on both sides, a practice that has become very difficult in a country where political divisions have greatly deepened in recent years.
On Friday, the Managing Director of the International Monetary Fund, Kristalina Georgieva, called for “finding a solution as soon as possible,” stressing that reaching a solution is of “paramount importance” to the global economy, noting also that the United States should make more efforts to “reduce its public debt.” .
