The parties in the US Senate have agreed to avert the US government's impending payment default in mid-October. The compromise provides for the debt cap to be raised by democratic votes so that the money will last into December. The politicians are giving themselves a respite without having solved the problem. The debt cap determines the total amount of debt that the federal government may take on in order to meet its obligations. Because the government spends more money each year than it earns, it has to borrow money on a regular basis. The Republicans in the Senate have so far not only refused to approve a suspension of the debt ceiling, but also to allow a vote that suspended the debt ceiling by a simple majority.They would have had to forego the filibuster process, in which members of parliament can block votes until the blockade is lifted with at least 60 out of 100 senatorial votes.
Winand von Petersdorff-Campen
Business correspondent in Washington.
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After long hardened positions, the parties began Wednesday evening negotiations after a compromise proposal by the Republican parliamentary group leader Mitch McConnell. He had suggested the delay in order to give the Democrats more time, according to his own statements. President Joe Biden and Treasury Secretary Janet Yellen had increased public pressure on the Senate in recent days. Biden had recalled that the debt cap was not linked to its infrastructure program and other spending plans, but to commitments that were largely made under previous governments. Under his predecessor Donald Trump alone, the federal debt has grown by a third. The debt cap, which was raised three times under Trump with votes from both parties, has stood at 28 since the beginning of August,$ 4 trillion.
Financial crisis, recession, poverty
The Treasury Department reduced payments to public servants' pension and health funds in order to remain solvent.
According to Yellen, her department runs out of money on October 18, maybe a few days later.
Yellen himself has called in several urgent letters to the Congress leadership to suspend or raise the debt ceiling.
In an event on Wednesday with Biden and business leaders, she warned of a disaster if the Senate does not find a solution quickly.
A severe financial crisis, a recession, new poverty and hardship for the millions of transfer recipients and ultimately long-term damage to the creditworthiness of the United States would ensue, the minister warned.
The White House had invited chief executives from the finance and defense industries as key witnesses.
Jamie Dimon, chief executive of JP Morgan Chase, said paying outstanding bills is a moral duty to be taught to children.
Congress should never have let it get to the point where the government was on the verge of default.
In Dimon's opinion, the debt cap should be abolished.
A payment default would not only lead to a catastrophe, but also trigger incalculable cascade effects.
Finally, Dimon recalled that allies and enemies alike witnessed the spectacle.
The challenges culminate
When the solution to the fiscal crisis is postponed to December, the challenges will culminate: At the beginning of December, budget laws must also be passed that place the financing of government tasks on a legal basis. The interim solution for the debt cap also does not solve the basic conflict. The Republicans do not want to agree to a temporary suspension of the debt cap until the end of next year. They advertise that the Democrats use the so-called reconciliation procedure.
This elaborate parliamentary procedure would allow them to raise the debt ceiling by a majority.
The Democrats are against it for several reasons: They fear the Republicans are taking advantage of the situation to publicly denigrate the Democrats as irresponsible debt-makers for debts for which the Republicans share the responsibility.
In addition, the reconciliation process would oblige them to a fixed sum, while the Democrats are actually aiming for at least a temporary suspension of the debt ceiling.