The president of the United States, Joe Biden, and that of the House of Representatives, Kevin McCarthy, will meet on Monday to continue negotiating the elevation of the debt ceiling, according to the parliamentary leader. McCarthy said he had a "productive" call with Biden on Sunday. The president has called him from Air Force One, the presidential plane, in which he was returning from Japan from the meeting of the G7, the group of seven large developed countries.
"Time is of the essence," McCarthy said. Negotiations resume this Sunday. Representative Garret Graves, one of the Republican negotiators, has indicated that spending levels will be a "fundamental" point of the talks. Biden has already announced that he was canceling part of his Asia-Pacific tour to face the negotiations. It was not initially clear whether the rest of the congressional leaders would be present at the meeting, as in previous meetings. The White House has not yet disclosed the contents of the call.
Earlier, in Hiroshima, Biden had referred to the issue at length in his press conference at the end of the summit. Biden's concern is that the most extreme Republicans are willing to cause the default of U.S. obligations in order to pass the political bill. "As for the merits based on what I have offered, I would not be to blame. As for politics, no one would be blameless. And, by the way, that's one of the things that some are contemplating," he said.
"I think there are some MAGA Republicans in the House who know the damage it would do to the economy. And since I'm president, and presidents are responsible for everything, Biden would take the blame. And that's the only way to make sure Biden isn't re-elected."
For MAGA Republicans, Biden is referring to supporters of former President Donald Trump and his slogan (Make America Great Again). Trump himself has expressed favor of causing a default if Biden does not accept the massive cuts that Republicans want to impose on him, despite the economically catastrophic consequences it would have, according to experts.
McCarthy won election as speaker of the House of Representatives on the 15th ballot after making concessions to the extremist group, of which he is somewhat hostage, making an agreement difficult. "Now is the time for the other side to move from their extreme positions, because much of what they have already proposed is simply, frankly, unacceptable," Biden said in Hiroshima. "I can't guarantee that they won't force a default by doing something outrageous. I can't guarantee that," he added.
On the other side, it is McCarthy who accuses the Democrats of being extremist: "President Biden does not believe that there is a single dollar of [additional possible] savings in the federal government's budget. He would rather be the first president in history to default on the debt than risk upsetting the radical socialists who are calling the shots for the Democrats right now," he tweeted Saturday.
Increasing risk
In an interview with NBC's Meet the Press, Treasury Secretary Janet Yellen insisted on the need to resolve the issue soon: "I indicated in my last letter to Congress that we expect not to be able to pay all our bills in early June and possibly as early as June 1. And I will continue to report to Congress, but I certainly have not changed my assessment. So I think it's a hard limit," he said when asked if that date could be flexible. "There is always uncertainty about tax revenues and spending, so it is difficult to have absolute certainty about it, but my assessment is that the odds of getting to June 15 and being able to pay all our bills are quite low," he added.
The fact that the U.S. government does not have funds to meet all its obligations does not necessarily imply defaulting on the debt from the beginning. The Treasury may give priority to those payments whose default would have greater side effects over others. There are some theoretical alternatives also to achieve extra financing (from issuing a high-denomination platinum coin to playing with the face value and interest on the debt), but all have contraindications.
Neither Biden nor Yellen have been in favor this Sunday of using one of those possible shortcuts: invoking the fourth paragraph of the 14th Amendment of the Constitution, which says that "the validity of the public debt of the United States, authorized by law (...) it should not be questioned." The president of the United States believes that it is a very risky maneuver that can be overturned by the courts: "I think we have the authority. The question is: could it be done and invoked in time that it could not, was not appealed and, as a consequence, pass the date in question and still default on the debt?" That does not mean that the president does not consider it for the future and has expressed his intention to find a way to challenge the courts with the validity of that route, but once the current crisis has been overcome.
However, Biden has been confident in the possibilities of agreement: "The United States has never reneged ... It has never defaulted on our debt, and it never will," he said, overlooking a 1979 default that was due to technical reasons. In the previous debt ceiling crisis, in 2011, with Barack Obama as president and Biden as vice president, an agreement was reached near the limit, but the debt payment was not defaulted. "It would be a very serious circumstance if we did not pay our debt for the first time in 230 years. It would be a serious problem," he said in Hiroshima.
Meanwhile, the fact that the word default is pronounced again and again already has consequences and is noticeable in the interest rates of the debt in the markets. The White House Council of Economic Advisers released a report according to which the threat of blockade is already having an effect; An episode of default, however short, would leave a costly bill and a prolonged default would cause the gross domestic product to fall by 1.5% in the third quarter (at an annualized quarterly rate of 6.1%) and raise the unemployment rate five points, destroying 8.3 million jobs.
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