Democratic President Joe Biden and the Republican speaker of the House of Representatives are meeting today to continue their bitter negotiations over the federal debt limit.

There are less than ten days left for the parties to reach an agreement that will allow the US to continue paying its bills.

But the talks, for the time being at least, seem to have come to an absolute impasse.

“My position has not changed. Washington cannot continue to spend money we don’t have,” Mr. McCarthy, the Republican leader on the issue, said on Twitter after a phone call with the Democratic leader.

“We will meet tomorrow in person to continue negotiations,” he announced, information that was quickly confirmed by the White House.

Mr. Biden warned, also via Twitter, that he would not accept a deal “that would protect billions (of dollars) worth of subsidies to big oil companies while jeopardizing the health care of 21 million Americans. Or it will protect tax evasion schemes for the wealthy while jeopardizing food aid for 1 million Americans.”

“America has never defaulted on its debts. And he never will,” he added later from his plane, returning from Japan, where he attended the G7 summit, in Washington.

“unacceptable”

Like almost all major economies in the world, the US lives on credit. But there is an American peculiarity, and that is the privilege of Congress to vote to approve an increase in the maximum public debt that the government of the world’s largest economy has the right to reach.

This year Republicans refuse to raise the famous “cap” unconditionally: they require drastic cuts in public spending to give the green light. Democrats reject it. Each side blames the other for this situation.

Joe Biden strongly criticized the “extreme” claims of the Republicans yesterday Sunday in Japan, stressing that “much of what has already been proposed is simply, frankly, unacceptable”, estimating that a solution can still be found.

It is common for last-minute deals to be struck on the issue, but time is running out for the country to avoid the risk of default.

This unprecedented situation would have potentially devastating consequences for the US economy, if not the global one.

June 1st

The world’s largest economy would be unable not only to pay bills and wages, but also its foreign creditors.

For the first time, holders of U.S. Treasury securities, considered the safest in the world’s financial markets, will not be able to receive interest-free loans.

This will happen from June 1 if the borrowing limit is not increased, US Treasury Secretary Janet Yellen has been warning for weeks.

He also appeared to rule out the possibility of resorting to the 14th amendment of the Constitution, which President Biden has mentioned and could theoretically bypass the obligation to raise the borrowing limit from Congress.

But it does not appear that it can be “appropriately used in these circumstances, given the legal uncertainty surrounding it and given the short deadline” to find a solution, Ms. Yellen said yesterday.

“Big step back”

There was optimism in the middle of last week, after Democratic and Republican leaders met with President Biden at the White House.

But the proposal presented Friday by Republican negotiators was a “big step back,” spokeswoman Karin Jean-Pierre said, describing the “package of extreme partisan demands” on offer.

And he pointed the finger at Republican leaders who depend on Donald Trump loyalists, accusing them of “threatening to take our country into default for the first time in its history.”

Mr. McCarthy also spoke on Saturday night of “a step back in the negotiations”, but from the White House’s point of view, complaining that “the left wing of the Democratic Party” is now “holding the helm”.

Cause of the impasse: Republicans are demanding that federal spending be cut back to the 2022 level. In other words, $130 billion in public spending cuts.

This is a red line for the Democrats.

The Biden administration is proposing to cut spending while simultaneously raising tax rates for the wealthiest Americans and corporations that currently benefit from tax breaks or refunds. Republicans reject it.