IB: The United States will touch the "red line" of debt, and the "rip-off" between the two parties will become white-hot!

China News Network, May 5 (Chen Caixia) On the 10th local time, US President Biden and the leaders of Congress of the Democratic and Republican parties negotiated face-to-face at the White House, hoping to reach a compromise agreement on raising the government debt ceiling, but failed to break the deadlock.

House Speaker McCarthy, a Republican, said he had not seen any new movement on the matter. The White House said in a statement that Biden has been rejecting Republican efforts to use the debt ceiling to negotiate and force concessions on the budget, a point he reiterated in the day's talks.

The negotiations mean that the political differences around raising the debt ceiling will reach a climax, which may have an impact on the pattern of the 2024 presidential election and may even impact the global economy.

At the same time, the Association of U.S. Government Employees filed a lawsuit against Biden and U.S. Treasury Secretary Janet Yalcon, asking the U.S. government to remove the debt ceiling and prevent the risk of employee pay cuts, layoffs or mandatory leave from reaching the ceiling.

Infographic: US President Joe Biden.

The debt problem has become more urgent

Biden engaged in closed-door negotiations

According to the Associated Press, on the same day, US President Biden and House Speaker McCarthy, Senate Republican leader McConnell, House Democratic leader Jeffries, and Senate Democratic leader Schumer held a closed-door meeting at the White House to try to find a solution to the debt default crisis.

The so-called debt ceiling is the maximum amount set by the US Congress for the federal government to borrow to meet the payment obligations that have been incurred. Touching this "red line" means that the U.S. Treasury has exhausted its borrowing authority. Typically, the U.S. government gets congressional approval to borrow extra money to avoid default.

But in 2023, McCarthy and other radical Republicans decided to say no, accusing the "Biden administration of profligate work" and "not being fiscally responsible" and demanding that the Biden administration first agree to sweeping spending cuts.

Biden, for his part, accused Republicans of using the country's economy as a blackmail, insisting on raising the debt ceiling first, as in previous years, before discussing spending cuts to reduce debt. Biden has repeatedly stated, "I want to emphasize to congressional leaders that they should, as always, raise the debt ceiling and don't let the debt default." ”

In February, Biden held an hour-long face-to-face closed-door meeting with McCarthy at the White House, but neither side made any substantive commitments or compromises.

At present, as the Democratic and Republican parties continue to pull over raising the debt ceiling, the US debt has snowballed into the world's largest "snowball", reaching $31.4 trillion. The cost of the last two US administrations has been particularly high, with former US President Trump's administration pushing "tax cuts", the Biden administration pushing "infrastructure", and the new crown epidemic bringing high additional spending, which makes the "debt ceiling" issue more urgent.

Infographic: U.S. House Speaker McCarthy (left) talks to lawmakers. Photo by China News Agency reporter Sha Hanting

U.S. government employees are at risk of layoffs without pay

Biden and Yellen were prosecuted

In the face of the risk of default on the US debt that may explode at any time, because the Democratic and Republican parties insist on not making concessions to each other, the US "Capitol Hill" pointed out that the negotiations mean that the political differences around raising the debt ceiling will reach a climax.

Biden and congressional Democrats have worked hard to push for a debt ceiling hike with no strings attached. But congressional Republicans are pushing to tie spending cuts to higher debt ceilings. McCarthy once bluntly said, "Any agreement that only raises the debt ceiling and does not cut spending, the House will not agree." ”

U.S. Treasury Secretary Janet Yellen has previously warned that if Congress does not act early to raise the debt ceiling, the United States may hit the statutory debt ceiling of $6.1 trillion as early as June 31.

The AP noted that the U.S. economy would be "severely damaged" in the event of a debt default, and warned that a prolonged government default could result in 830.<> million job losses, greatly increasing the likelihood of a "severe recession like the Great Depression."

In addition, CNN also pointed out that a default on government debt may cause the United States to lose its AA+ sovereign credit rating, with "catastrophic consequences" for the US economy and even the world economy.

Shay Acabas, a budget analyst at the Bipartisan Policy Research Center, a US think tank, pointed out in an interview with the New York Times that the "debt ceiling" crisis will continue to erode the credit of the US government and the value of US dollar assets such as US debt, thus bringing significant impact and far-reaching impact on the global economic pattern.

Faced with the risk of current debt default, on the 8th local time, the US Government Employees Association filed a lawsuit against Biden and Yellen, asking the US government to cancel the debt ceiling and prevent the risk of employees without pay, layoffs or mandatory leave caused by the debt reaching the ceiling.

The American Government Employees Association, which represents nearly 7,5 federal employees, called for blocking the implementation of a law that sets the nation's debt ceiling, saying it could be "unconstitutional," The Hill reported. The complaint also alleges that if the debt ceiling is reached, Biden and Yellen will be forced to decide which payments to prioritize, which would be interference with congressional power.

Infographic: US dollars.

If a delay programme is adopted

Will hit the 2024 general election

The Associated Press notes that to avoid a default on the U.S. debt, there are several potential options for both the Democratic and Republican sides:

First, the default date of the debt could be extended by a few weeks while negotiations continued;

Second, a vague compromise is reached and a commitment to spending cuts of an indefinite amount.

However, this only pushes the issue back, and 2024 is the US presidential election year.

If all else fails, the White House has not ruled out invoking constitutional authority to bypass Congress to unilaterally authorize more borrowing, but the move could be challenged in court.

Yellen has said that approving debt issuance is the job and authority of Congress, and there is no other way to protect U.S. finances than to raise the debt ceiling in Congress, and the government should not consider whether to bypass Congress to issue debt directly, because it will be a constitutional crisis.

At the same time, Yellen also warned that if Congress does not fulfill its duties, the White House and the US Treasury have no good choice at all, and can only invoke the 14th Amendment to the US Constitution to usurp the power of Congress to issue debts on their own.

In an interview with MSNBC, Biden said of the 14th Amendment to the Constitution, "I'm not there yet." ”

Since 1985, the U.S. Treasury has taken more than a dozen special measures to avoid default, and the Democratic and Republican parties have frequently negotiated the debt ceiling to avoid a government shutdown. The analysis said that the two parties will continue to fight over the debt ceiling in the coming weeks. (End)