After weeks of negotiations, America can breathe: by a vote of the American Congress, the United States suspended Thursday June 1 the ceiling of its debt and dismissed, within a few days, the threat of a default. “This is a great victory for the economy and for the American people,” said President Joe Biden.
According to the US Treasury, the world’s largest economy had only until Monday to avoid bankruptcy. “A default would have caused severe hardship for American families, potentially resulting in the loss of millions of jobs and trillions of household wealth,” Treasury Secretary Janet Yellen said in a statement. a press release, “delighted” with this vote.
America, like almost all major economies, lives on credit. But unlike other developed countries, the United States regularly comes up against a legal constraint: the debt ceiling, its maximum amount of indebtedness, which must be formally raised or suspended by Congress. From this routine legislative procedure, the Republicans, the majority in the House of Representatives and their boss Kevin McCarthy, have made an instrument of political pressure against Democratic President Joe Biden.
A series of meetings at the White House, in small or large committees, endless negotiating sessions… the whole of Washington was suspended for weeks from the fate of the famous “debt ceiling”. Although it is very common for last-minute agreements to be reached on this type of file, these endless negotiations have prompted the rating agency Fitch to place the United States’ AAA rating “under surveillance”. .
Saturday evening, in the middle of the long holiday weekend, the two parties finally snatched an agreement with forceps. This text made it possible to avoid the worst: that the coffers of the country find themselves dry on June 5, risking pushing the United States into default. Overnight, the country would have had the greatest difficulty in honoring its financial commitments, whether in terms of salaries, pensions or reimbursements to their creditors, and would have been forced to make drastic choices. This unprecedented situation would have plunged into the unknown the American finance and economy but also, by extension, international.
It is to avoid this scenario with potentially catastrophic repercussions that Democratic President Joe Biden and Republican House of Representatives boss Kevin McCarthy reached this compromise. The agreement had already been approved Wednesday evening by a large majority of elected members of the House of Representatives. It is now up to Joe Biden to enact it – a mere formality. The Democratic leader said he was “eager” to do so. The president also said he would address the American people early Friday evening to detail the outlines of the text.
Concretely, the text makes it possible to suspend for two years, therefore until after the presidential and legislative elections of 2024, the maximum amount of indebtedness of the United States, currently at 31,400 billion dollars. In exchange, Democrats agreed to limit some spending, but not as much as Republicans wanted. That is why many of them opposed the measure, both in the House and in the Senate. “Make no mistake, there is still a lot to do” to clean up American finances, assured the Republican tenor in the Senate, Mitch McConnell. A big point of contention for the left, the compromise includes modifications to the conditions imposed to benefit from certain social aid. “I cannot, in my soul and conscience, vote in favor of a bill that harms workers,” said the influential senator Bernie Sanders.