Biden Preparing Deal with Republicans to End American Debt Crisis

A source familiar with the issue of raising the US public debt ceiling revealed that US President Joe Biden is ready to conclude a settlement with the Republican opposition over public spending, in order to put an end to a political conflict that could lead the United States to default on its debt.

Biden submitted to the Republican, Speaker of the US House of Representatives, Kevin McCarthy, a proposal on cuts that would reduce federal government spending by more than a thousand billion dollars over ten years.

Biden also pledged to reduce the US deficit, which exceeds three thousand billion dollars, over ten years.

The source indicated that the White House is ready to put a ceiling on public spending over a period of two years, while the Republicans are calling for a longer period.

Also read: “International Criticism” on the American debt crisis: We hope we will not wait until the last moments

Serious concerns necessitate the agreement

It is noteworthy that Biden also offered to reallocate funds that were originally earmarked to respond to the “Covid-19” pandemic, which he had initially ruled out negotiating under the threat of state bankruptcy.

And US Treasury Secretary Janet Yellen reiterated the need for Democrats and Republicans to reach a settlement on the public budget that would enable Congress to approve raising the public debt ceiling.

The conservatives link their agreement to raise the public debt ceiling to an agreement to reduce public expenditures.

Secretary Yellen stressed that if the Congress, which is divided between a Democratic Senate and a Republican House of Representatives, does not take action, “it seems almost certain that we will not last much longer than next June.”

Yellen confirmed that the approved payment system was “developed in order to pay government bills,” and not “to pick which bills to pay,” which does not give the treasury any margin to give priority to payments over other accounts.

And she pointed out that if an agreement is not reached, a situation will be reached in defaulting on the payment of some obligations, stressing that this is “unacceptable.”

Expectations of the suffering of the American economy

White House spokeswoman Karen Jean-Pierre said in a statement that Biden was “very clear that Congress needs to act to avoid default.”

Jean-Pierre spoke about default, saying that it is “a recipe for an economic disaster that will push the economy into chaos,” and referred to it as a “fabricated crisis,” stressing that avoiding default is the responsibility of every member of Congress.

Analysts expect that the US stock markets will suffer from a temporary severe shock in the event that the US Treasury Department fails to fulfill all its financial obligations.

Likewise, interest rates charged by investors on bonds issued by the United States are expected to rise sharply.

It should be noted that this increase in the cost of credit will lead to a decline in business and household investments, as well as in consumption, which would lead to a severe recession in the United States, and perhaps this recession will affect the economies of Europe and elsewhere.

And as of next June 1, the United States could find itself in a situation of default, meaning that it will not be able to meet its financial obligations, whether in terms of wages and pensions or paying its financial obligations to creditors.

The US President and the Speaker of the House of Representatives held discussions on Monday, but they ended without reaching an agreement on how to raise the US government’s debt ceiling of $31.4 trillion.

Also read: An American think tank warns of Washington’s inability to pay its debts in early June