Hope for deal grows, specter of default pushed back to June 5

Apocalypse averted? The White House and the negotiators continued Friday to construct a compromise rich in political ulterior motives to avoid a US default, which could however occur on June 5 instead of the 1st, offering a short additional period.

“We are very close, and I am optimistic,” the American president said late Friday afternoon. “Hopefully we’ll know by tonight if we’re able to get a deal done,” Biden added.

“We are closer (to an agreement) but it’s not done yet,” said a source close to the discussions, skeptical about the possibility of an announcement on Friday. “We made progress yesterday, I want to make further progress today,” said the main Republican protagonist of this political-financial soap opera, the Speaker of the House of Representatives, Kevin McCarthy. But “nothing is certain until everything has been agreed,” he added, to keep the pressure on Democratic President Joe Biden.

Four-day extension

There is no shortage of pressure in this affair, which is difficult to understand outside the United States and more generally outside the Washington bubble. The date on which the US Treasury will find itself unable to honor its financial commitments has however been refined, now set for June 5, against June 1 previously, offering a few days of respite.

“Based on 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 raise or suspend the debt ceiling by June 5. “, detailed Friday the American Secretary of the Treasury, Janet Yellen, in a letter to the elected officials of Congress.

More than $130 billion in payments for pensions, health, and for veterans in particular, are planned during the first two days of June, which “will leave the Treasury with an extremely low level of resources”, he said. she clarified.

Ball in the center

The challenge is to get Congress – the Republican House and the Democratic Senate – to vote quickly to raise the public debt ceiling, otherwise the United States could find itself in default, an unprecedented situation with economic implications. , potentially catastrophic financial and social.

The agreement would freeze certain expenses, but without touching the budgets devoted to defense and veterans, report for example the New York Times or the Washington Post. It would postpone for two years, until after the next presidential election, the risk of default.

Each camp wants to limit damage at the political level. Kevin McCarthy, who needs to assert his stature as Speaker of the House, could claim to have instilled more budgetary rigor, while the Democrats would claim to have protected social benefits or major investment projects. The American president, campaigning for re-election, explained Thursday that “two opposing visions” were at work in these discussions.

Some progressives within the Democratic Party, just like some elected representatives of the Republican Party have threatened not to ratify, or to delay as much as possible a text which would make too many concessions to the opposing camp. Joe Biden and McCarthy must therefore play in the center to rally the most parliamentarians in each party, an excessively difficult exercise in a country where political divisions have widened significantly in recent years.