A last-minute compromise was finally found. US President Joe Biden and Republican House Leader Kevin McCarthy reached an agreement in principle on the thorny debt issue on Saturday, May 27. A crucial step to avoid a payment default by the world’s leading economic power.
This compromise, announced by Mr. McCarthy, must be approved urgently by Congress. The United States could otherwise find themselves as of June 5 in default of payment, that is to say unable to honor their financial commitments, whether they are salaries, pensions or reimbursements to their creditors.
No details were given on the content of the agreement, but the Republican leader said in a short speech that the budget compromise found was “completely worthy of the American people”. Kevin McCarthy only praised the “historic reductions” in public spending that he said the agreement provides, which was the main demand of the Republicans.
Above all, he indicated that he would have a new interview on Sunday with Joe Biden and that he intended to organize a vote on the agreement on Wednesday in the House of Representatives, with a Republican majority. Next will come the Senate, with a Democratic majority.
Refusal of a “blank cheque”
This agreement avoids a “catastrophic [payment] default”, reacted Joe Biden, Saturday, in a press release. He added that it was “a compromise, which means that everyone does not get everything they want”, but ensured that the text “reduces expenditure while protecting essential public programs”. .
The United States regularly comes up against a legal constraint: the debt ceiling, the maximum amount of indebtedness of the country, must be formally raised by Congress. From this routine legislative procedure, the Republicans, in the majority in the House of Representatives since January, have made an instrument of political pressure.
Refusing to issue a so-called “blank check” to the Democratic president, they conditioned any increase in this ceiling, currently set at 31,400 billion dollars (29,260 billion euros), to budget cuts. And entrusted to Kevin McCarthy, who poses as an intransigent defender of budgetary rigor, the responsibility of negotiating with the American president.
Re-election candidate Joe Biden has long refused to come to the negotiating table, accusing the opposition of holding the US economy “hostage” by demanding such cuts. After several meetings at the White House between the two men, the teams of the president and the Republican speaker finally got down to endless negotiating sessions.
A constrained parliamentary calendar
The agreement in principle reached on Saturday evening gives a little air to the American markets, which were beginning to see this paralysis with a bad eye. The rating agency Fitch had placed the AAA rating of the United States “under review” on Thursday, saying that failure to reach an agreement “would constitute a negative sign in terms of governance”.
The world economy, already in the grip of “high uncertainty”, could have “done without” these tense negotiations, had also criticized the director of the International Monetary Fund, Kristalina Georgieva.
Still, this compromise must now be validated by the Senate, narrowly controlled by the Democrats, and by the House of Representatives, on which the Conservatives have a fragile majority. The parliamentary calendar is constrained: many elected officials have returned to their homes across the United States for a break of several days, on the occasion of the long Memorial Day weekend. They are instructed to be ready to return to Washington urgently.
In addition, some progressives within the Democratic Party, as well as elected representatives of the Republican Party, have threatened not to ratify, or to delay as much as possible a text that would make too many concessions to the opposing camp. A Republican elected to the House of Representatives, Bob Good, estimated on Saturday that in view of what he knew of the compromise, “no elected representative claiming to be from the conservative camp could justify an affirmative vote”.
