Day after day, dollar calculations are being made in Washington, and the conclusion is simple: The time to pass legislation raising the US public debt ceiling before the country defaults is running out very quickly. .
After a practice of more than a century, the United States has reached a position where Congress must increase the total amount of debt that the federal government can take on, or it will not be able to cover all its expenses.
Since this debt ceiling was established in 1917, updates of this kind have been made 78 times. Even during the four years of Donald Trump’s term, the ceiling has been raised three times, without a deadlock similar to the current one.
Now, similar to what happened for example in 2011 when Barack Obama was in the White House and Congress was also dominated by the Republican Party, an understanding is hard to come by, with the deadline fast approaching to avoid a situation of division in the public accounts of the largest economy on the planet.
Although Treasury Secretary Janet Yellen says it is not possible to pinpoint the day when the federal government will stop meeting all of its expenditures, the calculations being made point to the fact that, from the first day of June, this scenario could come true. .
The debt limit had already been reached, at the beginning of the year, and since then the Treasury has used the surpluses it had and managed, day by day, the new revenues that come in and the expenses that must be incurred.
On June 1, the first day that the coffers can be emptied, tax revenues expected to be received approach $26 billion (€24.23 billion at current exchange rates) and expenditures exceed $100,000 million, creating the risk of recording the first breaches of the State’s obligations in Balancing with employees, pensioners or suppliers.
To avoid this, an agreement to raise the debt ceiling must be reached quickly. And soon it won’t be until the 1st of June, it must be before that. According to fund manager PIMCO, to ensure that everything is approved in a timely manner by both houses of Congress, it is necessary to reach an understanding in the next few days.
Perhaps for this reason, a sense of urgency is evident, on the part of the Biden administration and the House Republican leadership, in negotiating an agreement. Throughout this week, meetings were repeated between the two parties, and there were new attempts at rapprochement this Friday.
However, the distances remain significant, which is particularly worrisome given the limited time available to reach an agreement. The central issue is that the Republican leadership, under pressure from the far right in the party, requires spending cuts compared to last year to agree to increase the debt limit, while the White House, under pressure from the far left, does so. You don’t want to bypass the spending freeze.
“The starting point for solving the problem is spending less than last year. It’s not that difficult,” Kevin McCarthy, the Republican leader in Congress, said at the start of another meeting. concessions, saying that “both sides have to understand that they can never have everything they want.”
In the scenario in which the pessimistic scenarios for the economy are set if the Treasury begins to fail in payments to families, businesses and markets, the key lies in the ability that the Biden and McCarthy teams will have to lead the majority of their party to accept they will have to make concessions in order to reach a deal. Something, more so than in similar episodes in the past, seems to be more difficult in a time of massive political polarization in the United States.
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