Americans are anticipating a new round of tension between President Joe Biden and his Republican opponents when the two parties meet on Tuesday to discuss raising the ceiling of public indebtedness, in a tug of war whose effects threaten the entire global economy.
Democrat Biden will host at the White House the two Republican leaders in Congress, Speaker of the House Kevin McCarthy and Senate Minority Leader Mitch McConnell, in a meeting that will launch a decisive round in a struggle for economic influence between the two parties and their eyes on the 2024 presidential election.
The debate revolves around raising the public debt ceiling, a routine measure that was adopted without any controversy, since the US government often spends more than its budget, but it cannot borrow additionally without congressional approval.
Republicans this year made agreeing to raising the debt ceiling conditional on Biden first agreeing to deep budget cuts, in keeping with the position that the president has been wasteful and irresponsible in his economic management.
Days before the meeting, which will be attended by the Democratic minority leader in the House of Representatives, Hakeem Jefferies, and the leader of the Democratic majority in the Senate, Chuck Schumer, Biden accused the Republicans of taking the country’s economy “hostage.”
The total amount of debt is 31 trillion dollars
Biden, who hopes to win a second presidential term in the 2024 elections, stresses that the priority is to raise the debt ceiling, and then it is possible to discuss budget cuts to reduce the $31 trillion debt, which is the largest in the world.
While the debate about which step precedes the other may be normal, it has turned into a test of political wills, with each party clinging to its position despite the fact that time is running out, and the possibility of a US default on its debt is beginning to loom seriously on the horizon.
What would it mean for the world’s largest economy to default on debt payments? The possibilities are multiple: unleashing a wave of panic whose effects may not be limited to the United States, a sharp rise in interest rates, selling stocks, downgrading the rating of treasury bonds…
A White House analysis warned that “the imminent breach of the US debt ceiling could cause significant disruptions,” but its actual occurrence “would likely cause severe damage.”
When does this date come? No one has an exact answer, but estimates speak of the date of June 1, that is, only three weeks after Tuesday’s meeting.
Don’t negotiate “under threat”
The closer the date gets, the wider the gap between Biden and the Republicans appears to be.
According to the far-right “Freedom Caucus”, which practically dominates the decision of the Republicans in the House of Representatives, the White House adheres to an “irrational and reckless” strategy on the issue of the public debt ceiling.
For his part, Biden rejects any change in his position.
The president, who has reached the age of eighty, is counting on the economic recovery from the consequences of the pandemic that was achieved during his first term, as a winning card in the battle for the 2024 elections.
While preserving these gains may be an additional motive for him to avoid a new crisis, he does not wish to submit to Republican pressure to link raising the debt ceiling and reducing the budget, considering that this will turn a simple and essential duty into an issue subject to political back-and-forth.
Biden said Friday that Republicans want to “take the debt hostage to get us to agree to some unfair cuts.”
“We can discuss (about) where we can cut, how much spending … but not under the threat of default,” he said, adding, “That’s why we have a budget track to discuss publicly.”
Biden reminded that Republicans voted unconditionally three times in favor of raising the debt ceiling during the term of his Republican predecessor, Donald Trump. “Nobody has ever refused to vote in favor of raising the debt ceiling,” he added.
And he stressed that he would tell Republican leaders on Tuesday that they should “do what every other Congress has done, which is raise the debt ceiling and avoid default.”
Analysts talk about the existence of several exits to avoid default in the short term, including, for example, reaching an interim agreement to raise the debt ceiling that allows the completion of the arduous negotiations.
Another solution may be the conclusion of a settlement that includes pledging budget deductions to be determined at a later stage in exchange for raising the debt ceiling. However, this threatens to involve the country in repeating this tension next year, with the complications that this means during the presidential election year.
And in the event that all solutions fail, the White House did not rule out resorting to a constitutional power that would allow it to bypass Congress and unilaterally authorize raising the borrowing ceiling, although such a step is likely to cause controversy and be challenged before the courts.
And Biden confirmed, in an interview with “MSNBC” channel, on Friday, that things “have not reached this point yet.”
While the world awaits the economic conclusion of this attraction, it seems that the Biden administration is also seeking to play on the political chord and the impact of this internal crisis on Washington’s external position in the face of opponents such as Moscow and Beijing.
“They want to see the American system in chaos. They want to see that we are unable to perform our basic functions,” said Shalanda Young, director of the White House Office of Management and Budget.