2023-04-26 22:38:01
In Congress, the Republicans advance their pawns
Republicans in the House of Representatives on Wednesday passed a text conditioning an increase in the US debt ceiling to a budget cut.
Kevin McCarthy on April 25, 2023 at the Capitol.
Getty Images via AFP
In the game of lying poker being played out between the White House and the House of Representatives over the debt ceiling of the United States, Republican Kevin McCarthy scored his first points on Wednesday, with the vote on his project providing for a reduction unprecedented public expenditure in exchange for an increase in the ceiling
His plan, which provides for a $4.5 trillion cut in federal spending over the next ten years in exchange for a $1.5 trillion increase in the public debt ceiling, currently at $31 trillion, has indeed been adopted. by the Republican majority in the House of Representatives.
For Kevin McCarthy, it was not won. The discussions continued between Tuesday and Wednesday in order to convince all the Republicans, as his room for maneuver is weak, because of the reduced majority he has.
The issue was all the more important, politically, for the “speaker” of the House, as it was also a test of his ability to unite within his party, although 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 more moderate Republicans, concerned about the impact of such a plan on the American economy on the other.
By having his project validated, which is however not likely to be followed by the Senate, with a Democratic majority, the Republican leader succeeds in increasing the pressure on US President Joe Biden, who launched his campaign on Tuesday. view of his re-election in 2024. “The Senate did nothing. The president did nothing. The Chamber will raise the ceiling and limit Washington’s spending,” Kevin McCarthy assured Tuesday evening.
The text also provides that Congress will have to decide again on the country’s debt ceiling at the end of March 2024, i.e. in the midst of the American presidential campaign, which would undoubtedly make it one of the major themes. This actually already started on Tuesday. Kevin McCarthy reacted to the announcement of Joe Biden’s candidacy by saying 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 in order to discuss a responsible increase in the ceiling and thus avoid the first flaw in our history”. “I will be happy to meet with McCarthy but not on whether or not to raise the debt ceiling. It’s non-negotiable, “replied the American president on Wednesday during a press conference at the White House.
Big challenge for the United States
The Democrats believe that the debt ceiling is not a negotiable subject, recalling that it does not concern new spending but those already voted in the past, from administrations from both parties.
And 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 American warranty. A default “would cause an economic and financial catastrophe,” US Treasury Secretary Janet Yellen warned again on Tuesday.
Unlike the majority of 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 beginning of the 1960s, most often without difficulty.
Quickly finding a consensus is therefore 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 thus anticipates a risk of default “possibly at the beginning of June”, a risk which 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.
Is Kevin McCarthy’s plan the solution then? Not necessarily because, according to Moody’s, the latter would have a real impact on the economy: a drop of 0.6 percentage point 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%, against 3.5% in March 2023, compared to a scenario of voting for a new ceiling without conditions. “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,” hammered Janet Yellen on Tuesday.
AFP
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