“Joe Biden and Kevin McCarthy Reach Last-Minute Debt Compromise”

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 delivered on the content of the agreement but the Republican leader estimated, in a short speech, that the budgetary compromise found was “quite worthy of the American people”. Kevin McCarthy only welcomed the “historic reductions” of the public expenditure that the agreement envisages according to him, 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 makes it possible to avoid a ” default [de paiement] catastrophic », 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 “reduced spending while protecting essential public programs”.

The United States regularly come 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 make a pretend “blank check” to the Democratic President, they have 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.

Joe Biden, candidate for his re-election, has long refused to come to the negotiating table, accusing the opposition of taking the American economy by storm. “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 dim view. The rating agency Fitch had placed on Thursday ” under surveillance “ the AAA rating of the United States, believing that the failure to find an agreement “would be a negative sign in terms of governance”.

The global economy, already in the grip of a “high uncertainty”could have ” happen “ of 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 home to the four corners of the United States for a break of several days, on the occasion of the extended 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 given what he knew of the compromise, “no elected official claiming to be from the conservative camp could justify a positive vote”.