(Washington) In the game of liar poker being played between the White House and the House of Representatives around the debt ceiling of the United States, Republican Kevin McCarthy hopes to advance his pawns by having his project voted on Wednesday, which provides for a unprecedented decline in public spending.
For the United States, the stakes are high: never before has the country found itself in default on its debt and the latter serves as a safe haven for the global financial sector, due to the solidity of the guarantee. American.
However, a default “would cause an economic and financial catastrophe”, again alerted the American Secretary of the Treasury, Janet Yellen.
Unlike most advanced economies, US debt is capped and its level must be voted on by Congress in order to keep up with its steady rise. A situation that has already occurred 78 times since the early 1960s, most often without difficulty.
Not this time however, Republicans and Democrats starting a tug of war from the current ceiling, of 31,000 billion dollars, reached, at the beginning of the year, and while the pre-campaign, with a view to the presidential election of 2024 is suddenly accelerated, with the declaration of candidacy of President Joe Biden.
For Republican Speaker of the House, Kevin McCarthy, it is also an opportunity to impose his authority within a reduced and turbulent Republican majority with a proposal which, a priori, has consensus within his party: to force the Biden administration to an austerity cure in exchange for an increase in the ceiling.
“The [Democratic] Senate did nothing. The president did nothing. The House will raise the ceiling and limit Washington’s spending, ”assured the elected Republican on Tuesday evening.
The plan proposed by the Republican leader thus provides for a reduction of 4,500 billion dollars in public spending over 10 years, with the exception of military spending, in exchange for an increase of 1,500 billion dollars in the ceiling.
If this level is not reached by March 31, 2024, a new vote would be necessary to allow the debt to continue to increase, i.e. in the midst of the presidential campaign.
The latter is in the back of the minds of all the protagonists.
Reacting to the announcement of Joe Biden’s candidacy, Kevin McCarthy felt that the president seemed “focused on his own political future when he should be on the future of the United States”.
President “Biden should have announced that he was finally coming to the negotiating table to discuss raising the ceiling responsibly and thus avoiding the first flaw in our history.”
Still, the issue is also important for the “speaker” of the House, caught between a minority of elected Republicans close to Donald Trump and who want to reduce the influence of the federal government on the one hand, and Republicans more moderates, concerned about the impact on the American economy on the other.
Discussions continued at 3 p.m. ET to gain support from dragging Republican lawmakers.
To validate his text, Mr. McCarthy cannot have more than four elected Republicans missing. And time is running out: the Chamber will not meet again from this weekend until next May 9.
However, finding a consensus is a necessity for the United States, especially since the default could occur more quickly than initially expected.
In a note published on Monday, Moody’s Analytics anticipates a risk of default “possibly early June”, a risk that is beginning to be taken into account by investors, as evidenced by the costs of insurance to cover themselves against a payment default. United States, the highest since 2011.
Enough to hasten the passage of Mr. McCarthy’s plan? Not necessarily, because, according to Moody’s, the latter would have a real impact on the economy: a drop of 0.6 percentage points in American potential growth for 2024 as well as the destruction of 780,000 jobs, enough to make Republicans tremble. moderate.
Unemployment would reach 4.6%, compared to 3.5% in March 2023, compared to a scenario of voting for a new ceiling without conditions.
A scenario that the Biden administration defends.
“Congress must vote to raise or suspend the debt ceiling. He must do so without conditions. And he shouldn’t wait until the last minute,” Janet Yellen said on Tuesday.