There are only ten days left for the White House and the Republican opposition to reach an agreement on the debt ceiling, and allow the United States to continue to pay its bills. But negotiations appeared to be deadlocked on Sunday. The Republicans refuse to raise this famous "ceiling" without conditions and indeed demand drastic budget cuts before giving their green light. The Democrats refuse. And each side blames the other for this situation.
Joe Biden, who has just returned from Japan where he was attending the G7 leaders' summit, is due to meet with Republican leader Kevin McCarthy on Monday to continue their tough negotiations on the US debt ceiling. The Democratic US president on Sunday slammed the Republicans' proposals: "It is time for the other side to abandon its extreme positions, because much of what it has already proposed is simply, frankly, unacceptable," he said, believing however that a solution could still be found.
"I don't think (these proposals) are extreme, I don't think they're draconian," McCarthy said Sunday on Fox News. Biden tweeted that he would reject a deal "that protects billions (of dollars) in subsidies for big oil companies while endangering the health care of 21 million Americans. Or that protects wealthy tax evaders while endangering food aid for 1 million Americans."
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Potentially catastrophic consequences
Time is running out to prevent the United States from defaulting, an unprecedented situation with potentially catastrophic consequences for the U.S. economy, and even the world. The world's largest economy would then be unable to repay its creditors, but also to pay certain salaries of civil servants or veterans' pensions. That could happen as early as June 1, according to the Treasury Department. "My assessment is that the chances of reaching June 15 and still being able to pay all of our bills are pretty low," Treasury Secretary Janet Yellen said Sunday in an interview with NBC.
It also ruled out the possibility of recourse to the 14th Amendment of the US Constitution, which could theoretically circumvent the obligation to raise the ceiling. The article states that "the validity of the public debt of the United States (...) must not be called into question." It does not appear to be "appropriate in these circumstances, given the legal uncertainty surrounding it and the tight timeline," according to Yellen. Joe Biden had, a little earlier, indicated to study this possibility, noting however that the question was whether it "can be done and invoked in time".
"Extreme" demands
Almost all major economies live on credit. But, it is an American peculiarity, it is the prerogative of Congress to vote to raise the maximum amount of public debt that the world's largest economy is allowed to accumulate. They have already pointed this out many times. Optimism was in order in the middle of the week, after a meeting between Democratic and Republican congressional leaders with Joe Biden at the White House.
But the proposal made Friday night by the Republican team "was a big step backwards," according to White House spokeswoman Karine Jean-Pierre, deploring "a set of extreme partisan demands." She pointed the finger at Republican officials, under the thumb of Donald Trump's relatives, "who (threaten) to put our nation in default for the first time in our history". Kevin McCarthy had also evoked Saturday night "a step back in the negotiations", but on the part of the White House, accusing "the left wing of the Democratic Party" of being "in control".
The sticking point: Republicans' demand to cut federal spending, to 2022 levels. That is, cutting $130 billion in spending. A red line for the Democrats. The Biden administration is proposing to cut spending while raising taxes for the wealthiest and businesses that now benefit from generous tax breaks. What the Republicans refuse.