hopes for a political agreement are increasing

hopes for a political agreement are increasing

US President Joe Biden at the White House, May 25, 2023 in Washington

plan finally forward? The White House and negotiators continued Friday to build a politically motivated compromise to avoid a US default, which could happen on June 5 instead of June 1, and provide a shorter delay.

President Joe Biden was quite “optimistic” by the end of the afternoon, saying he hoped to know “by tonight if we can reach an agreement”.

“We’re close (to an agreement) but it’s not done yet,” said a source close to the discussions earlier, casting doubt on the possibility of an announcement on Friday.

Speaker of the House of Representatives Kevin McCarthy, the main Republican character of this period of political and financial opera, had noted the development.

But “nothing is certain until everything is agreed,” he added, putting pressure on the president.

There is no shortage of pressure in this matter, which is difficult to understand outside the United States and more generally outside the Washington bubble.

The date that the US Treasury will find itself unable to meet its financial commitments has however been improved, now set for June 5, versus June 1 previously, giving a few days of grace.

“According to the most recent data available, we now estimate that the Treasury will not have sufficient resources to meet the government’s obligations if Congress does not increase or suspend the debt limit by June 5. “, explained Friday the American secretary of the Treasury Janet. Yellen, in a letter to elected officials of Congress.

More than $130 billion in pension, health and veterans payments are expected in the first two days of June, which “will leave the Treasury with a very low level of resources”, he said.

“Hostage” –

The challenge is to get Congress – the Republican House and the Democratic Senate – to vote quickly to increase the maximum level of public debt, otherwise the United States could find itself in a default, an unprecedented situation in the possibility of economic, financial and social disaster.

This trickery of lawmakers has long been routine for both parties. But this time the Republicans demand, instead of their green light, a reduction in public spending.

Officially, Joe Biden refuses to negotiate, believing he is being held “hostage”.

In fact, the advisers of the two camps have been talking non-stop for many days and, according to several American media, have already agreed on several main lines.

The deal would limit some costs but would not touch budgets devoted to defense and veterans, reports such as the New York Times and the Washington Post.

It would postpone for two years, until after the next presidential election, the risk of failure.

– Debt reduction –

Each camp wants to minimize the damage at the political level.

Kevin McCarthy, who needs to assert his status as Speaker of the House, can claim to have introduced more budgetary austerity, while Democrats claim to have protected social benefits or major investment projects.

The US president, campaigning for re-election, explained Thursday that “two conflicting visions” were at work in these discussions.

He made himself a defender of social and financial rights. But according to the media, the 80-year-old Democrat would give up on these negotiations to increase as much as he wanted the means provided in the fight against tax evasion.

If a deal is reached, it will still have to be passed by the Senate, which is narrowly controlled by Democrats, and the House of Representatives, where conservatives have a weak majority.

The congressional calendar is limited: many elected officials returned to their strongholds for several days off, during the extended “Memorial Day” weekend.

In addition, some progressives within the Democratic Party, like some elected representatives of the Republican Party, have threatened not to approve, or to delay as much as possible the text that would make many concessions to the opposing factions.

IMF Managing Director Kristalina Georgieva said on Friday that finding a solution is “crucial” for the global economy, stressing that the US should do “more to reduce public debt”.