A few days before the deadline, US President Joe Biden and Republican leader Kevin McCarthy reached an “agreement in principle” on Saturday to avoid a default in payment by the United States. The agreement will still have to be validated by Congress.
The House of Representatives, with a Republican majority, will vote on Wednesday, its boss said. Next will come the Senate, with a Democratic majority.
Kevin McCarthy estimated in a short speech that the budgetary compromise found, of which he did not deliver the details, was “completely worthy of the American people”. The conservative leader only welcomed the “historic reductions” in public spending that the agreement provides, according to him, which was the main demand of the Republicans.
He indicated that he would meet again on Sunday with the Democratic president, and would publish the same day the text, the result of difficult negotiations. According to several American media, the agreement reached between the executive and the opposition raises for two years, after the presidential election of 2024, the public debt ceiling of the United States.
Without raising this limit, the first world power risked being in default of payment on June 5, unable to honor its financial commitments, whether salaries, pensions or reimbursements to their creditors.
Like almost all major economies, the United States lives on credit. But unlike other developed countries, America regularly comes up against a legal constraint: the debt ceiling, the maximum amount of indebtedness of the United States, which must be formally raised by Congress.
From this routine legislative procedure, the Republicans, in the majority in the House of Representatives since January, have made an instrument of political pressure. Refusing to make a so-called “blank check” to the Democratic president, they have conditioned any increase in this ceiling, currently set at 31,400 billion dollars, to budget cuts.
And placed in Kevin McCarthy, who poses as an uncompromising defender of budgetary rigor, the responsibility of negotiating with the octogenarian president. Re-election candidate Joe Biden has long refused to come to the negotiating table, accusing the opposition of holding the US economy “hostage” by demanding such cuts.
After several meetings at the White House between the two men, the teams of the president and the Republican “speaker” finally got down to endless negotiating sessions – all abundantly commented on by the whole of Washington.
The agreement in principle reached on Saturday evening gives a little air to the American markets, which have never really panicked but that this paralysis was starting to get impatient. The rating agency Fitch had placed the AAA rating of the United States “under surveillance” on Thursday, estimating that the failure to reach an agreement “would constitute a negative sign in terms of governance”.
The global economy, already in the grip of “high uncertainty”, could have “did without” these tense negotiations, had also criticized the director of the International Monetary Fund Kristalina Georgieva.
Emergency return to Washington
Still, this compromise must now be validated by the Senate, narrowly controlled by the Democrats, and by the House of Representatives, on which the Conservatives have a fragile majority.
The parliamentary calendar is constrained: many elected officials have returned home to the four corners of the United States for a break of several days, on the occasion of the extended weekend of “Memorial Day”. They are instructed to be ready to return to Washington urgently.
In addition, some progressives within the Democratic Party, as well as elected representatives from the Republican Party, have threatened not to ratify, or to delay as much as possible a text that would make too many concessions to the opposing camp. It is in fact very common for last-minute compromises to be reached on this type of file.
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