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Wednesday, March 29, 2023

Debt limit: Top Republican McCarthy rules out default

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The US is no longer allowed to take on new debt. Democrats and Republicans must agree, otherwise the US could soon be insolvent.

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The chairman of the US House of Representatives, Kevin McCarthy, does not expect a default. “There will be no default,” McCarthy said on CBS. He will meet with President Joe Biden next Wednesday to find a compromise in the dispute over the debt limit. McCarthy said the out of control spending must be brought under control. However, he promised that there should be no savings in social security and health insurance. When it comes to defense spending, he wants to make sure the money is used effectively and efficiently.

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The White House has so far refused to make any concessions in connection with raising the debt limit. Biden said on Thursday that he would not allow anyone to use US creditworthiness as a bargaining chip.

The United States had already reached the federal debt ceiling permitted by Congress on January 19th. Finance Minister Janet Yellen said in mid-January that the government could remain solvent until the beginning of June by reallocating the funds. After that, payment defaults threatened. So far, the debt limit is around 31.4 trillion US dollars (currently just under 29 trillion euros).

In the past, Republicans and Democrats had always agreed to raise the limit – albeit often only after a tough struggle. That is also to be expected this time. Republicans regained a narrow majority in the House of Representatives in November’s midterm elections. To secure the necessary votes for the presidency, McCarthy had to make sweeping concessions to the far right wing of the party. Radical MEPs are opposed to raising the debt ceiling. A default by the world’s largest economy could have dramatic consequences for the global economy.

Source: Stern

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