May 23, 2024

Brighton Journal

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How are negotiations progressing in Congress to avert a global financial crisis?

How are negotiations progressing in Congress to avert a global financial crisis?

The US Treasury Secretary, Janet Yellen, activated the countdown and set the date when everything would explode. June 1 USA May be the default If lawmakers don’t raise or eliminate the debt ceiling to prevent countries from defaulting on debt, it could turn into a global financial crisis. Negotiations have heated up in the First World Power so that the situation has gotten out of hand and has no impact beyond its borders.

Increasing the debt limit is a source of strong political contention between Republicans and Democrats over public spending. A hotly debated topic in the presidential campaign The battle between Joe Biden, who has announced his candidacy, and Donald Trump, the Republican favorite, could be re-released.

Republicans They want Biden to cut spendingWhile Democrats have rejected and condemned a “handout” that affects the American people, even some of its flagship programs.

The debt ceiling is the total amount of money the U.S. government is authorized to borrow to meet its obligations, including Social Security and Medicare benefits, military and executive pay, interest on the national debt, tax refunds, and other payments. It is currently pegged at $31.381 trillion.


Lawmakers speak to the media about the debt ceiling debate. Photo: Kevin Deitch / Getty Images via AFP

Paralyzed

If the limit is not raised, the government will be paralyzed as it has been in other cases. But it can have even bigger consequences.

Because the United States runs a budget deficit, it spends more money than it takes in, and must borrow large sums to pay its bills. In addition to paying social security benefits along with the wages of military and government employeesAmerica also has to pay interest and other payments to bondholders holding loans.

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Even as Russia’s invasion of Ukraine drags on US economic growth, Treasury officials debate debt ceiling Represents the greatest risk to America’s financial position.

In a letter to House and Senate leaders, Treasury Secretary Yellen called on congressional leaders Monday night to “protect the full faith and credit of the United States by acting as soon as possible” to extend the limit.

While the official said it was impossible to predict with certainty the exact date the US would run out of money, he cautioned based on his calculations.You can repay your loan by the beginning of June.

Treasury Secretary warns lawmakers: “Waiting until the last minute to suspend or increase credit limits will cause serious damage to business and consumer confidence, increasing taxpayers’ costs of short-term borrowing. It will negatively affect America’s credit rating,” he says.

Indeed, in 2011, the mere threat that the US government might default on its obligations Caused a drop in US credit ratings., when he lost AAA.

Yellen: "It is imperative that Congress act as soon as possible to raise or suspend the debt ceiling".  Photo: Stephanie Reynolds/AFP
Yellen: “Congress must act as soon as possible to raise or suspend the debt ceiling.” Photo: Stephanie Reynolds/AFP

Cuts

Republicans imposed conditions on Biden to raise the debt ceiling, particularly drastic cuts in spending and reversing some aspects of the president’s agenda: student loan forgiveness and tax credits for green energy, two key issues on the Democratic agenda and Republicans. Rejected.

President Biden It won’t negotiate with Republicans for a cut White House spokeswoman Karine Jeane-Pierre said Tuesday that the spending would be a condition.

The media is questioning lawmakers on Capitol Hill about a possible default.  Photo: Kevin Dietsch/Getty Images via AFP
The media is questioning lawmakers on Capitol Hill about a possible default. Photo: Kevin Dietsch/Getty Images via AFP

Biden has invited House Republican Speaker Kevin McCarthy to meet with him at the White House next week. However, the President Refuses to link to Republican spending-cutting goals With the practice of allowing more public debt.

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Jean-Pierre said Biden was open to discussing “a separate process to address budget cuts,” but said the debt ceiling issue should be dropped entirely.

“It is the constitutional duty of Congress to avoid error,” he said. “With Congress now short on time, it is clear that an unconditional suspension of the borrowing limit is the only practical way to avoid default,” he said.

Besides, Biden deems it “unfair” and “dangerous.” McCarthy’s proposed spending cuts, the spokeswoman said. In the House of We Score, where they hold a slim majority, Republicans have approved a bill that would allow more borrowing in exchange for sharp spending cuts in various government programs. That plan is unlikely to be approved in the Senate, which has a majority of Democrats.

Or negotiate. Meanwhile, time is pressing.

bp

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