With 10 days to go before the threat of an unprecedented default by the US federal government becomes a reality, US Democratic President Joe Biden and opposition Republican House Speaker Kevin McCarthy made an effort on Monday to show they believe it can be overcome. the crisis, they adopted a more conciliatory tone, although the huge gap between them has not been bridged, at least not yet.

“I completed a productive meeting” with Mr. McCarthy, the US president said in a news release released by his administration, calling for “good faith” negotiations to find a fiscal compromise as soon as possible.

He acknowledged that there are still “disagreements”, which the teams of the two protagonists are called upon to reconcile within a minimum of time.

Treasury Secretary Janet Yellen reminded yesterday that it is “very likely” that the US will face a default after June 1.

Kevin McCarthy, after the tete-a-tete in the Oval Office, said for his part that “the tone tonight was better than all the previous times”, but also spoke of deep disagreements and a lack of awareness of its urgent nature issue on the other side.

The meeting was intended to restart negotiations that had stalled over the weekend in the absence of Mr. Biden, who was in Asia.

The octogenarian Democrat, who returned yesterday Sunday from the G7 summit in Japan, had intended to also go to Oceania when he left; the political-financial impasse in Washington forced him to cut the trip short.

Hostage

To avert the risk of a potentially catastrophic default, Congress – the Democratic-controlled Senate and the Republican-controlled House – must vote to approve an increase in the maximum amount the state can borrow. In previous years, it was generally standard procedure.

This time, Republicans are demanding drastic cuts in public spending over the course of a decade to give the green light. Joe Biden, who is campaigning for re-election in 2024 on a promise of more social justice, rejects it. He accuses the opposition of holding the American economy hostage.

“We have to change course, our debt is too big,” Mr McCarthy insisted before meeting Mr Biden, as his party has argued lately that the US cannot continue to live on loans “from China ».

The US president says he is willing to talk about reducing the deficit, but for his part, he points out that tax loopholes should be examined in depth and that big companies and the richest Americans “pay their fair share” in taxes. Something the other side doesn’t even want to hear.

Trump

The famous “borrowing limit” or “debt ceiling” of more than $31 trillion – a world record – was breached months ago; the government has so far managed the situation with accounting arrangements.

If a default were to be declared, the US would not be able to pay interest payments to holders of US Treasury securities, which are considered the safest investments in global financial markets. They will not be able to pay salaries to civil servants, pensions to veterans of the armed forces, and so on.

The consequences for the US and global economy would be dire, economists warn.

However, recently former President Donald Trump, also campaigning for the 2024 election, has urged his party to drive the country into default unless it secures massive cuts in public spending.

Constitution

Who will back down first? The American president, who knows full well that a possible recession, whatever its political genesis, would jeopardize if not destroy his chances of re-election? Or Kevin McCarthy, whose position depends on a dragon of extreme parliamentarians, who, like former President Trump, demand that he not be considered to “fold”?

“We have to reach an outcome that we can sell to both sides,” acknowledged Mr. Biden yesterday, who likes to say that in his long career in Congress he has become an unmatched negotiator.

The Democrats’ left wing would prefer to take the initiative to unilaterally raise the federal government’s borrowing limit, citing the 14th amendment to the US Constitution, which prohibits any “questioning” of the solvency of the world’s largest economy.

In this case, the US government would be able to issue new bonds as if the debt limit did not exist. But in that scenario lurks the danger of a lengthy legal battle that pits Joe Biden against the Supreme Court — where the tide is tipped decisively to the right.