Biden calls on Congress to negotiate the debt ceiling, given the risk of bankruptcy

President of the United States, Joe Bidenon monday he invited congressional leaders to a meeting next week to discuss the increasing the debt ceiling before Treasury Secretary Janet Yellen’s notice of a possible default on June 1.

In a letter to Biden and the leaders of the two chambers, Yellen called on Congress to unfreeze the negotiations, given that the treasury may “not be able to meet all obligations [de pago] Government, “at the beginning of June, potentially June 1”. For this reason, Yellen urged “Congress to act as soon as possible in a way that offers long-term certainty that the Government will continue to make payments.”

The country ran out of funds on January 19 and has since had to resort to “emergency measures” to finance itself. Now the Ministry of Finance is warning that these measures could be exhausted earlier than expected. The warning comes after Republican congressmen – led by House Speaker Kevin McCarthy – approved a debt limit proposal that has little chance of successfully passing the Democratic-majority Senate.

In an invitation to negotiate with congressional leaders on Monday, Biden described the Republican proposal as an “extreme MAGA plan” — invoking Trump’s slogan, Let’s Make America Great Again— which would end “critical financing of education” and that it would “take health care and food assistance away from millions of working families.” Biden and McCarthy have not met in more than three months.

New debt limit

Before the government goes bankrupt, negotiators should agree either on a new debt limit (currently $31.4 trillion, about 28.5 trillion euros), or on a temporary suspension of the existing one, delaying negotiations on a new limit without a sudden default.

The lack of progress in the negotiations is a response to both sides’ shifting of their priorities. Republicans are seeking deep cuts in public spending in exchange for approval of a new debt ceiling, while Democrats are reluctant to sacrifice their spending priorities. So Democrats are seeking an unconditional increase in the debt ceiling, similar to the one the party approved for Donald Trump during his presidency. For their part, the Republicans demand that the government take measures to reduce the deficit in exchange for the approval of the new limit.

He failure to reach an agreement, an unprecedented event, would have disastrous consequences for the American economy, which is not at its best and whose recession could infect the rest of the planet’s economy. In her letter, Janet Yellen went on to say that this could “harm global leadership [de Estados Unidos] and cast doubt on our ability to defend our national security interests.”