The United States has a month for its parties to reach an agreement on the debt ceiling that prevents the entry of the country into suspension of payments or default. So raw. With the progressive polarization in the country’s politics, the drama surrounding this matter has become recurrent.
In principle, the dark prospects that the default situation would create in the finances of the nation and half the world makes it hard to believe that the leaders will not reach an agreement, even out of an instinct for survival. But the current deadly confrontation between Democrats and Republicans, plus internal divisions among conservatives, may feed the appetite for the destructive blame game, making it impossible to rule out a suicidal debacle.
Treasury Secretary Janet Yellen warned Monday that the Administration might be “unable to continue to meet all of the Government’s obligations as soon as June 1.” The exact date depends on her – she added – on federal tax revenues that for now have been lower than expected in recent months. But she is sure of the catastrophic economic consequences of not reaching the necessary pact so that Congress approves the increase in the debt limit on time. Such a disagreement “would cause serious hardship for American families, damage our global leadership position, and raise questions about our ability to defend our national security interests,†Yellen said.
In 2011, in a political scenario similar to today’s in which the Barack Obama government was dealing with a Republican-majority Congress, the political conflict led conservatives to refuse for months to agree to an agreement on the ceiling in question. And although in the end the blood did not reach the river thanks to a last-minute agreement, the uncertainty led to the downgrade of the debt rating by Standard
In December 2021, the debt limit was raised to $31.4 trillion. And this ceiling was reached on January 19. Then Yellen announced the application of “extraordinary measures” or accounting patches so that the machinery of the Administration would continue working until June, when the margin of discretionary actions – such as the suspension of contributions and reimbursement of investments for retirement and care funds health care for federal government workers – would run out.
The unique rule of statutory debt limitation was introduced in the United States in 1917, during World War I. The objective was to expedite bond issues and, therefore, borrowing, while guaranteeing a certain fiscal discipline. But the legislators of the time did not foresee the progressive increase in the weight of the State in the economy, with the consequent expansion of public spending and the increase in the volume of public debt in circulation. Now the rule is a sword of Damocles and the president of the nation is supposed to be the first to prevent his fall on the shoulders of the country.
Joe Biden has summoned the four leaders of Congress, the heads of the Democratic and Republican groups in the House of Representatives and in the Senate, so that next Tuesday they will seek a way out of the crisis.
The president of the Lower House elected after the tight Republican victory in the November legislative elections, Kevin McCarthy, will attend the meeting reinforced by the success he achieved last week in moving forward in that body, and after arduous negotiations with the different families of his group, his own proposal to raise the debt ceiling. The bill, with no future as guaranteed to be rejected by a Democratic-controlled Senate, raises the debt limit by $1.5 trillion in exchange for spending cuts of $4.5 trillion: savings that would cut off key programs of Biden in terms of social spending and the fight against climate change by promoting clean energy and especially electric vehicles. It is a sacrifice that Biden is not willing to make.
So the swords, and not just that of Damocles, are high in Washington. Tragedy seems unthinkable, but it is more possible than usual. There are plenty of wickers, but there are doubts that Democrats and Republicans will be able to agree to make the basket.
