Senate Democratic Leader Chuck Schumer said he hoped a deal could be reached Thursday morning to avoid a US debt default, after hours of negotiations with Republicans who proposed an interim solution.
Senate Republican leader Mitch McConnell said Wednesday that he wanted to “save Americans a short-term crisis caused by the Democrats,” stressing that he would allow his opponents to agree as quickly as possible to suspend the debt ceiling until December.
He urged the Democrats, whose margin of legislative maneuver is hampered by their very small majority, to take advantage of this proposal to find a solution on their own in the longer term.
But Mitch McConnell said this solution goes through a more complex legislative path that the Joe Biden administration has rejected so far on the debt front.
“We’re making good progress, we haven’t got an agreement yet, but we hope to achieve it,” Chuck Schumer said in Congress, after about ten hours of backstage discussions.
The meeting was adjourned until 10:00 Thursday (14:00 GMT).
– Biden’s position is weaker –
Republicans flatly refuse to agree to any measure to raise or suspend the debt ceiling because they believe it would give President Joe Biden a blank check to fund his massive investment plan.
But these plans have not yet been approved in Congress, and raising the debt ceiling serves to repay mainly borrowed amounts, including thousands of billions of dollars spent under the presidency of Donald Trump.
On Wednesday, the White House responded coolly to the Republican proposal and its spokeswoman, Jen Psaki, called on them to “not put off problems” while a long-term agreement can be reached from now.
But Wall Street closed higher on Wednesday on the back of these signs of loosening.
The US Treasury has set October 18 as the date for the United States, the world’s largest economy, to start defaulting on its debts if Congress does not “raise the debt ceiling,” that is, increase the country’s ability to borrow.
The public debt ceiling is the legal maximum for public debt in the United States, and is set at $28.4 trillion.
The pressure has increased significantly in recent days on the Republicans, especially from Joe Biden.
The US president, whose position was weakened by the chaotic withdrawal from Afghanistan, and who is facing difficulty in passing major economic and social reforms, does not want this financial disaster.
On Wednesday, he called to the White House in person and via the Internet, prominent figures in the circles of Wall Street to warn of the repercussions of non-payment, which would set a precedent in the history of the United States.
– ‘Russian roulette’ –
“We are playing with fire,” said Citi President Jane Fraser.
Biden again called on the Republicans, asking them to “stop the game of Russian roulette” that harms the US economy and the US financial reputation.
The date of October 18 is not fixed, but US Treasury Secretary Janet Yellen said Wednesday that “the country’s liquidity will be very little” after this date in the absence of a legislative solution.
The government will then have to cut a large amount of its expenses, and perhaps also in the wages of official employees or in the social allocations for some groups of society.
The United States, like almost all major economies, has been dependent on debt for decades in terms of public expenditures and has raised the debt ceiling several times.
However, since Barack Obama’s presidency, the Republicans have begun to use this routine legislative maneuver as a tool for political pressure.
© 2021 AFP