Five keys to US debt: What if the country defaults?

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US President Joe Biden and Republican House Speaker Kevin McCarthy met on Monday after a weekend of off-and-on negotiations to raise the country’s debt limit. But there was no agreement and the government did it few days to avoid running out of money to pay your bills.

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Both sides are working to reach a budget deal before June 1, when the country could default, according to Treasury Secretary Janet Yellen.

Speaking to press after the meeting, McCarthy said they had not yet reached an agreement but the meeting had been “positive”. Biden endorsed what he said in his own statement after the meeting in the Oval Office.

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“We reiterate once again that non-payment is not in question and that the only way forward is to work in good faith for a bipartisan agreement,” said the White House chief. Your negotiators will continue to meet.

US President Joe Biden and House Republican Leader Kevin McCarthy at the White House on Monday.  Photo: AFP

US President Joe Biden and House Republican Leader Kevin McCarthy at the White House on Monday. Photo: AFP

McCarthy and the Republicans insist spending cuts in exchange for raising the debt limit. Biden arrived at the negotiating table after hesitating for months, but says Republican lawmakers will have to put their “extreme positions” aside.

Negotiators met again on Sunday and appeared to be approaching a 2024 tax deadline that would have cleared the impasse. After speaking to Biden on the phone as the president returned home from a trip to Asia, McCarthy was somewhat optimistic. But he warned that “there is no agreement on anything”.

Here are some keys to the negotiations and what could happen.

1- The axis of the controversy

The vote to raise the debt limit allows the Treasury Department to continue borrowing money to pay the country’s already high bills.

While it was once a routine process in Congress, more recent ballots have been used to lobby policy, because this is a mandatory approval initiative, other priorities can be added to it.

House Republicans, empowered by their House majority, refuse to raise the debt limit unless Biden and the Democrats impose federal spending cuts and restrictions on future spending.

The Republicans say so the national debt, currently at $31 trillion, it is unsustainable. They also want to prioritize other priorities, such as tougher work requirements for recipients of government cash relief, food stamps and the Medicaid health care program. Many Democrats are against these requirements.

Biden insisted that the debt limit be passed without major commitments, ensuring that the United States always paid its debts and that a debt default was non-negotiable.

But with the June 1 deadline approaching, when the Treasury says it will run out of money, Biden has entered negotiations with Republicans.

Janet Yellen, head of the US Treasury, warns the country could run out of money on June 1.  Photo: The New York Times

Janet Yellen, head of the US Treasury, warns the country could run out of money on June 1. Photo: The New York Times

2- Is there a possible solution?

There are signs of optimism, even if there were too turbulent times during the negotiations.

Intermittent talks resumed late Sunday and both sides appear to be moving towards an agreement. The negotiators left the Capitol after 8 p.m. Sunday and said they would continue to work.

After his phone conversation with Biden, McCarthy commented, “I think we can fix some of these problems if he understands what we want.”

“We need to spend less than we spent last year,” the lawmaker added.

Biden, for his part, said during a news conference in Japan before returning to the country, “I think we can make a deal.”

But this is only part of the problem. Any deal will also need to pass the House of Representatives and Senate with significant bipartisan support. Many hope that the approval of the White House and the Republican leadership will be enough to implement it.

The head of the House of Representatives, Kevin McCarthy, speaks to the press after meeting with President Joe Biden.  Photo: EFE

The head of the House of Representatives, Kevin McCarthy, speaks to the press after meeting with President Joe Biden. Photo: EFE

3- What are the obstacles?

Republicans want to return to 2022 spending level e impose a limit on future spending in the following decade.

Democrats are not willing to go to great lengths to cut federal spending. Instead, the White House has proposed keeping spending at current levels by 2023.

Policy priorities are also evaluated, including measures that could help accelerate construction and development of energy projects desired by both Republicans and some Democrats.

Democrats have strongly opposed Republican attempts to impose tougher work requirements for people receiving government cash assistance, food stamps, and Medicaid health care.

Biden, however, is holding the door open to discuss some of the job’s requirements.

4- What happens if the debt limit is not raised?

A government defaultIt would be unprecedented and devastating for the country’s economy. Yellen and economic experts have warned it could be “catastrophic.”

There really isn’t a manual for what might be happening. But it would have far-reaching repercussions.

The US budget.  /AFP

The US budget. /AFP

Yellen has noticed it would destroy the labor market and businessesand millions of families dependent on federal government payments “couldn’t get their payments,” including Social Security recipients, veterans, and military families.

More than 8 million people could lose their jobs, according to estimates by government officials. The economy could plunge into a recession.

“A default could cause widespread suffering as Americans lose the income they need to survive,” he said.

Interruptions in federal government operations could affect “air traffic control and safety, border security and national defense, and food security.”

5- Is there a plan B?

Some Democrats slipped that they could have raised the debt limit without help from Republicans.

Some progressives have urged Biden to invoke a clause in the 14th amendment that says the validity of US government debt “should not be questioned.” Therefore, the non-compliance would be unconstitutional, according to the argument.

Supporters of unilateral action say Biden already has the authority to roll over the debt limit if Congress doesn’t raise it, so the validity of the national debt isn’t called into question.

Could the president act alone? “It’s an issue that I think hasn’t been resolved,” he replied on Sunday, adding that he hopes that the judiciary can make a decision about it for the future.

Meanwhile in Congress, House Democratic Leader Hakeem Jeffries has launched a process that would send the matter to the entire House of Representatives and force a vote on raising the debt ceiling.

AND a cumbersome legislative procedure, But Jeffries urged House Democrats to pass the measure in hopes of getting the majority needed to bring it to a vote.

The problem for Democrats is that they have only 213 members on their side, five fewer than the 218 needed for a majority.

Convincing five Republicans to join his cause won’t be easy. Passing a minority petition is seen as a serious affront to the party leadership, especially on an issue as important as the debt ceiling. Few, if any, Republicans would be willing to suffer the consequences.

Source: AP

Source: Clarin

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