Thursday, June 8, 2023

Biden launches acrimonious talks to avoid US default

Biden, who just returned from Japan where he attended the G7 summit, will receive the Republican leader of the House of Representatives at the White House.

The two spoke Sunday as Biden flew back to Washington. According to US media, McCarthy described the talks as “productive”, and indicated that teams from both sides had resumed talks.

It is the first positive sign after a bitter meeting between Democratic and Republican negotiators at the White House on Friday, though without Biden, who was on his way to Hiroshima, Japan.

Republicans demand less public spending. The Biden administration declined and for its part has proposed slashing some spending and raising taxes on the wealthiest and the companies that benefit from tax refunds today.

Republicans strongly oppose any tax increase.

“Washington cannot continue to spend money,” tweeted McCarthy.

Biden warned them that he would “reject a deal that protects billions of dollars in subsidies to Big Oil while putting the health care of 21 million Americans at risk.”

concrete effect

Biden said, “America has never defaulted on its debts. And it never will.”

However, this could be a risk if no agreement is reached.

This unprecedented situation with potentially devastating consequences for the United States and the world economy could take place as early as June 1.

The United States may then be unable to repay holders of US Treasury bonds, the king of world finance. Similarly, the government could not pay certain salaries to officers or pension to ex-servicemen etc.

Decisions taken at the last moment can also have consequences. In 2011, there was only the threat of bankruptcy and because of this, for the first time, the United States lost its precious Triple A credit rating, the best among rating agencies.

Treasury Secretary Janet Yellen warned Tuesday that the tangible effects are already being felt. “Investors have become more reluctant to hold sovereign debt in June,” he added.

trump’s shadow

Meanwhile, the shadow of Donald Trump is hovering over the conversation. The former Republican president, who maintains strong influence, urged his party on May 10 to refuse to raise the debt ceiling, which would trigger a default if Democrats do not agree to cut spending.

On Sunday, White House spokeswoman Marine Jan-Pierre denounced the “highly partisan demands” put forward by conservatives.

McCarthy, for his part, accused “the left wing of the Democratic Party” of being “on his orders”.

If the disagreement persists, Biden has one recourse left: invoke the 14th Amendment to the US Constitution, which stipulates that “the validity of the public debt of the United States, authorized by law, shall (…) The question should not be raised”.

In other words, must be able to pay the previously approved expense.

Despite considering the possibility, Biden was skeptical, while Yellen also indicated “legal uncertainty” and a “tight deadline”.

Like almost all major economies, the United States lives on credit. However, in the United States it is the prerogative of Congress to vote on raising the public debt limit that the world’s leading economy is authorized to accumulate.

And what was initially a formality has now become a political battle.

World Nation News Desk
World Nation News Desk
World Nation News is a digital news portal website. Which provides important and latest breaking news updates to our audience in an effective and efficient ways, like world’s top stories, entertainment, sports, technology and much more news.
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