The markets can – a little – breathe. The US Congress on Tuesday agreed to temporarily raise the US debt ceiling until the end of the year, providing respite for the world’s largest economy before another fierce political battle to avoid default of payment.
Thanks to the sole support of elected Democrats (219 votes against 206, all Republican), the House of Representatives adopted a measure which plans to raise the debt limit of the United States by 480 billion dollars. Already approved by the Senate last week, this text was to be sent immediately to Joe Biden, who will promulgate it as soon as possible according to the White House.
This will allow the country to honor its payments until December, or even at the very beginning of 2022, removing the prospect of a default with catastrophic consequences for the mega-power and the rest of the world.
If this measure had not been adopted, the country could have found itself in bankruptcy as of October 18, had warned the Treasury. Its adoption was the subject of an intense standoff in the Senate, which finally approved this temporary solution last Thursday thanks to the very narrow Democratic majority.
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Republicans are refusing to endorse any long-term measures to raise the debt ceiling, claiming it would amount to giving Joe Biden a blank check to fund his massive investment plans.
These plans have yet to be passed by Congress, however, so raising the debt limit serves to repay sums already borrowed, including trillions of dollars spent under the Trump presidency.
Senate Republican Leader Mitch McConnell is now urging Democrats to reach – on their own – a lasting solution by December through a complex legislative path. But President Joe Biden’s camp has so far refused to use this “too risky” maneuver for the debt.
The text approved on Tuesday therefore only postpones until the end of November a parliamentary battle that promises to be epic over the finances of the United States. This showdown in Congress promises to be all the more tense as it will take place at the same time as the negotiations to approve a new budget before December 3. If parliamentarians do not come to an agreement before this date, the funding of the federal state will suddenly be cut (which is nicknamed “shutdown”), pushing hundreds of thousands of employees on technical unemployment. The high probability that the United States will return to the same financial uncertainty by December is far from reassuring the institutions or the markets.
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