The United States will not fail on October 18

The threat of default is postponed until December.

The United States’ default, with catastrophic financial and economic consequences, will not take place on October 18. It seemed unlikely, but persistent blockages in Congress made the threat real. It is now postponed to the beginning of December. The Republican Senate leaders in Washington reached an agreement on Thursday with their Democratic colleagues that the latter raise, at the margin, the ceiling of the public debt by a vote that they will not block.

Treasury Secretary Janet Yellen had warned that beyond October 18, the US government would no longer have the authority to borrow more because Uncle Sam’s debt ceiling set by the law at 28,400 billion dollars, will have been reached. The United States, like many rich countries, must continually increase its debt to finance spending and pay interest on past debts.

The American Congress adopts a temporary budget at the last minute to avoid the paralysis of federal services – Watch on Figaro Live

A deferred deadline

US law forces Congress to vote regularly to raise the debt ceiling. This obligatory passage is sometimes used by Republicans in an attempt to demonstrate that Democrats do not care about the unhealthy drift in public spending.

In the absence of a consensus to eliminate this law, the White House has been looking for weeks by which legislative means to raise the debt ceiling permanently or to suspend it for several years. The solution announced on Thursday does not solve the problem. It only postpones the deadline to the beginning of December by authorizing 480 billion dollars in additional debt. In the very short term, this nevertheless represents a relief for Wall Street: the global financial system is based on the principle that the US Treasury will always honor its debts. The US stock indices soared as soon as the temporary compromise was announced.

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