Officially, in January, the US authorities reached the borrowing limit, which is set at 31.4 trillion dollars. Since then, the US Treasury Department has been using contingency measures to pay the bills, but by early June the head of the department, Janet Yellen, will run them out as well.
The US president’s statements came after his meeting at the White House with congressional leaders, the only success of which, apparently, was the fact that it took place and negotiations began on the growing issue. heightened public debt. The next round of dialogue is scheduled for Friday, but judging by the progress of the parties, it will take time to find a compromise.
Raising the national debt ceiling, enshrined in US law in 1917, is often accompanied by political battles, but the current balance of power in Washington is particularly conducive. The president from the Democratic Party wants to spend a lot on the projects promised to his electorate (“green” energy, infrastructure, social assistance) and for the needs of the Pentagon, for which he prints bonds and increases taxes. Republican Party congressmen have traditionally advocated reducing the role and spending of the federal government.
Since 2008, US public debt has risen from $10 trillion to $31 trillion and continues to grow inexorably
But with all the drama of statements and forecasts, it’s too early for financiers to panic. Such doomsday assessments are heard almost every time the US government approaches the national debt ceiling. Sometimes a compromise was reached only in the last hours before the deadline, but in the last decades America has never reached a default. In the United States, it is customary to say that they have never failed at all, although some economists consider these statements controversial, pointing for example to the crisis of 1933 or the technical failure of 1979.
The winner of this game of nerves is usually the one who is most successful in convincing the Americans that it is the other party who is responsible for a possible default with all its consequences.
A few weeks ago, Republicans took a rather successful first step, managing to push through the House of Representatives, which they control, a bill that approves an increase in the national debt in exchange for government spending cuts.
The White House, judging by Biden’s statements, is not going to retreat yet. He is considering invoking the 14th Amendment to the US Constitution, which, according to the interpretation of White House lawyers, the country’s federal government is obligated to pay its debts in any case. In their understanding, this actually means that the US authorities, according to the constitution, cannot declare a default. In other words, he deprives the very existence of the national debt limit determined by Congress and unties the hands of the Biden team. At the same time, according to US media, this is against the law and practice of the past decades, so the use of such a mechanism is likely to provoke fierce legal battles over the powers of the US federal government. .
But, according to the newspaper Politico, despite the categorical public declarations of the parties, representatives of the Democratic Party are already conducting internal discussions and can partially accept the conditions of the conservatives to reduce state spending by advancing a counter-proposal.
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p class=””>The White House Council of Economic Advisers has released calculations that a short-term default would cause US GDP to decline by 0.6% and the loss of half a million jobs in the country. A prolonged default would cause GDP to “fall” by 6.1%, lead to the loss of 8.3 million jobs and the collapse of stock markets by 45%.
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