debt dispute
Impending insolvency of the USA: Joe Biden shortens his trip – despite initial progress
President Joe Biden wants to avoid an impending insolvency of the USA, the largest economy in the world, at all costs
© OLIVIER DOULIERY / AFP
There is progress, but a failure of the talks in the US debt dispute would be too dangerous: President Joe Biden is now shortening his next trip – and canceling the visits to Australia and Papua New Guinea.
After new talks about the debt dispute and the impending default in the USA, there is hope of an agreement. The White House said Tuesday that US President Joe Biden was “optimistic” that both parties could find a “responsible” budget solution. Republican Kevin McCarthy also indicated that he ultimately expects an agreement. Regardless, Biden canceled planned visits to Australia and Papua New Guinea because of the debt dispute.
The President’s new talks with top opposition Republican officials ended with a tentative rapprochement between the two sides, but no breakthrough. The White House said Biden had instructed his staff to “continue to meet daily” to discuss open issues. Biden will meet with senior Republicans upon his return from the G7 summit.
As planned, Biden will attend the G7 summit in Hiroshima, Japan this week. As the White House announced, he is canceling planned trips to Australia and Papua New Guinea after the summit, only to return to the United States on Sunday.
Republicans and Democrats speak of positive signs
Republican Kevin McCarthy indicated a positive outcome of the negotiations. “America is the number one economy in the world. And when we get through these negotiations, America’s economy will be even stronger,” McCarthy said.
The leader of Biden’s Democrats in the House of Representatives, Hakeem Jeffries, who was also present at the meeting, spoke of a “positive meeting” at which everyone agreed that there should be no default under any circumstances. Senate Majority Leader Chuck Schumer spoke of a “respectful” conversation. A meeting in the White House a week ago did not bring any rapprochement between Democrats and Republicans.
In a sign of increasing nervousness about the potential consequences of a default, more than 140 US company bosses wrote a letter to Biden and Congress leaders to underscore the need for an agreement. “We urge a speedy agreement so that the country can prevent this potentially devastating scenario,” said the letter, which was signed by the heads of Pfizer and Morgan Stanley, among others.
Biden has been asking Republicans for months to agree to an increase or suspension of the statutory debt ceiling. US Treasury Secretary Janet Yellen recently warned that a potential default by the world’s largest economy could occur as early as June 1st. This could trigger a global financial crisis and a severe economic downturn. The US would then no longer be able to pay most of its bills – millions of people could lose their jobs as a result. In 2011, a Republican majority in Congress delayed raising the debt ceiling. At that time, the US credit rating was downgraded for the only time in history
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USA have already reached the debt limit
The USA had already reached the debt limit of just under 31.4 trillion dollars (almost 29 trillion euros) in January. Since then, the US government has been using “extraordinary measures” to prevent insolvency, but the options for doing so are soon exhausted.
The opposition Republicans only want to approve an increase in the debt ceiling in return for cuts in government spending worth billions. They want to take back key elements of Biden’s reform policy, including billions in subsidies for renewable energy and a waiver of certain student fee debt. A corresponding law passed the Republican-controlled House of Representatives at the end of April
Biden rejects this and demands that Republicans agree to a debt ceiling hike without preconditions. The president accuses the opposition of taking the country’s economy “hostage” with the threat of default in order to push through their political agenda.
The US debt limit has been suspended or raised dozens of times by presidents of both parties over the past few decades – and with bipartisan majorities. The Republicans are flexing their muscles this year with their new majority in the House of Representatives.
US President Joe Biden invites you to a state visit because of the canceled trip
In view of the changed travel plans, Biden has invited Australian Prime Minister Anthony Albanese for an official state visit at a later date, the White House said on Tuesday. The government said it also contacted the office of the Prime Minister of Papua New Guinea, James Marape, to inform him of the changes.
However, Biden will attend the G7 meeting of the leading industrialized nations in Hiroshima, Japan, as planned. In addition to the USA, the G7 countries also include Germany, France, Italy, Great Britain, Japan and Canada, as well as representatives of the European Union. The heads of state and government are convening for the summit from Friday to Sunday (May 19-21). In addition to the Russian war of aggression in Ukraine and the problems of the global economy, the role of China should also be discussed.
Afterwards, Biden had actually planned visits to the island nation of Papua New Guinea and Australia. In Sydney on May 24, he should have attended the meeting of the so-called Quad Alliance together with the heads of government of Japan, India and Australia.