In the game of lying poker that is being played between the White House and the House of Representatives around the debt ceiling of the United States, Republican Kevin McCarthy scored his first points Wednesday, April 26, with the vote of his project providing for an unprecedented decrease in public spending in exchange for an increase in the ceiling.
His plan, which calls for a $4.500 trillion cut in federal spending over the next ten years in exchange for a $1.500 trillion increase in the public debt ceiling, currently at $31 trillion, was adopted by the Republican majority in the House of Representatives.
For Kevin McCarthy, it was not a given. Discussions continued between Tuesday and Wednesday in order to convince all Republicans, as his room for maneuver is small, because of the reduced majority he has. It was also a test for the "speaker" of the House of Representatives, to prove his ability to assemble when necessary a party torn by centrifugal forces.
By succeeding, the Republican leader is increasing the pressure on Joe Biden, who launched Tuesday in the campaign for his re-election in 2024.
"Our group voted for the only plan in Washington that addresses the debt ceiling, ends excessive federal spending and puts our country back on a path to sustainable growth," McCarthy said in a statement.
"The president has been very clear, this text has no chance of becoming law," White House spokeswoman Karine Jean-Pierre immediately reacted. "President Biden will never force the middle classes and workers to bear the brunt of tax cuts for the wealthiest, as this text provides."
Presidential campaign perfume
The bill also provides that Congress will have to vote again on the country's debt ceiling at the end of March 2024, in the middle of the US presidential campaign, which would undoubtedly make it one of the major themes.
It actually 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 focused on the future of the United States".
Wednesday's vote hit the nail on the head, saying it "sends a clear message to President Biden: continuing to ignore the problem is not an option. The president has to sit down at the table and negotiate." "I will be happy to meet McCarthy but not on whether or not to raise the debt ceiling. It is non-negotiable," said the US president, during a press conference at the White House, before knowing the outcome of the vote.
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, administrations from both parties. And for the United States, the stakes are high: never before has the country defaulted on its debt and the latter serves as a safe haven for the global financial sector, because of the strength of the American guarantee.
Possible default at the beginning of June
A default "would cause an economic and financial catastrophe," U.S. Treasury Secretary Janet Yellen warned again on Tuesday. Unlike the majority of advanced economies, U.S. 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 60s, most often without difficulty.
Finding a consensus quickly is therefore a necessity for the United States, especially since the default could occur more quickly than initially expected. In a note published 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 a default of the United States, the highest since 2011.
So is Kevin McCarthy's plan the answer? Not necessarily because, according to Moody's, the latter would have a real impact on the economy: a 0.6 percentage point drop in US potential growth for 2024 and the destruction of 780,000 jobs, enough to make moderate Republicans tremble.
"Congress must vote to raise or suspend the debt ceiling. It must do so unconditionally. And he doesn't have to wait until the last minute," Janet Yellen said Tuesday.
The summary of the week France 24 invites you to look back on the news that marked the week
Take international news with you everywhere! Download the France 24 app