Roughly a week before the threat of the US federal government filing for bankruptcy becomes a reality, as negotiations between Democratic President Joe Biden’s allies and the Republican opposition appear to be making no real progress, the rating agency Fitch Ratings downgraded yesterday Wednesday in “negative” the outlook of the American public debt, which is in the AAA grade, the highest.

The inability of the political forces to reach an agreement is a “negative sign of governance in general” and “of the will of the US to fulfill its obligations in a timely manner”, according to the house, which views with a bad eye “the political tensions that prevent ” the negotiations, but at the same time he assures that he “expects a solution in time”.

Despite day-and-night talks, President Biden’s and Republican teams have yet to reach a budget compromise.

This is a “completely fabricated crisis,” White House spokeswoman Karin Jean-Pierre said Wednesday, criticizing the refusal of conservatives in Congress to vote to raise or suspend the debt limit, something absolutely necessary to avoid the declaration of default by the federal government.

As bipartisan advisory groups count billions, dissect budget positions, discuss potential spending cuts, the spokeswoman for the US presidency launched an attack on the Republican right wing.

“They are now saying loudly what they used to say quietly, they are talking about the hostage of the (financial) solvency of the USA,” she complained, referring to recent statements by a politician belonging to the radical right in the House of Representatives.

“Not my fault”

The Democratic president proposed to Republican House Speaker Kevin McCarthy cuts to specific categories of spending that would exceed “a trillion dollars over ten years,” according to the White House.

Going even further than the reduction of the deficit that Joe Biden had already promised, worth around 3 trillion. in ten years.

The White House is also willing to set a cap on government spending for two years, but Republicans are demanding a much longer cap.

“I think we will be able to make progress today,” Mr McCarthy said yesterday, criticizing Mr Biden’s approach for the second time.

“It’s not my fault the Democrats can’t cut spending,” he snapped, once again accusing the administration of waiting until the last minute to negotiate.

“As Treasury Secretary Janet Yellen has been repeating for months, these political shenanigans around the debt limit are seriously hurting American businesses and families, raising short-term interest rates for taxpayers and threatening the creditworthiness of the United States,” said Lily Adams. , a ministry spokesman, after Fitch’s announcement.

This “warning” from the rating agency “underscores the need for joint and swift action by both parties in Congress to raise or suspend the debt ceiling,” he added.

June 1st

The American president initially insisted that he was not going to negotiate “with a gun to his temple”, under the threat of bankruptcy of the federal state.

But now, among other things, he is proposing to the Republicans, among other things, that resources that were originally intended to be allocated for dealing with the new coronavirus pandemic be recovered and utilized in another way.

Conservatives say they won’t approve any increase in the debt limit unless they secure commitments to big cuts in public spending.

If Congress — the Democratic-controlled Senate and the Republican-controlled House of Representatives — don’t act, “it seems almost certain that we won’t be able to go much beyond the beginning of June,” Janet Yellen recalled.

The reason, Ms. Yellen explained, is the organization of “our bill paying system,” which does not allow us to “decide which bills we pay and which we don’t”: this means that the Treasury Department has no leeway to make, for example, payments first debt relief instead of other obligations, to prioritize spending.

If there is no agreement we will “breach some of our obligations and that is not acceptable”, he insisted.

On June 1, in the absence of a deal, the US will find itself in default, or otherwise unable to pay interest payments to holders of US Treasury securities, salaries to public servants, pensions to veterans of the armed forces and so on.

The US Treasury Secretary added that her services will very soon provide further clarifications on the exact date the country is at risk of defaulting on payments.

This unprecedented scenario, economists point out, would be synonymous with a huge recession, turmoil in the US markets and the possible spread of the crisis throughout the world economy.