A US default could trigger a global financial crisis. Since this scenario is imminent, a solution must be found. Once again, the US President invites you to the summit meeting in the White House.
Shortly before an important trip abroad, US President Joe Biden is trying to find a solution to the dispute over the US debt ceiling. Today he is once again inviting high-ranking Republicans and Democrats to the White House for talks.
Such a meeting had already taken place last week – without a breakthrough. For Biden’s government, a US default is not an option. If the debt ceiling is not raised soon, one could happen.
For the US President, time is of the essence for another reason: on Wednesday he wants to travel to the G7 summit in Japan, and from there to Australia with a stopover in Papua New Guinea. During the trip, his ability to personally deal with domestic affairs is somewhat limited.
The US is not allowed to take on new debt
In the USA, the parliament sets a debt ceiling at irregular intervals and determines how much money the state can borrow. The debt ceiling is currently around 31.4 trillion US dollars (about 28.6 trillion euros). In the meantime, this debt ceiling has been reached and the US Treasury must tap into the capital reserves – because the US is now no longer allowed to take on any new debt to pay its bills. Biden and his Democrats need the Republicans in Congress to raise the debt ceiling. However, they are opposed to an increase without significant savings in certain government spending.
In order to find a solution to the dispute, Biden is now inviting the top meeting again, including the Republican Chairman of the US House of Representatives, Kevin McCarthy. He was not very optimistic about the upcoming date: “I still think we are far apart,” said the Republican in Washington yesterday. Biden, on the other hand, was cautiously optimistic over the weekend. “We’re making progress,” he said. However, the “crucial point” has not yet been reached.
Default could trigger global financial crisis
US Treasury Secretary Janet Yellen warns of a possible government default on June 1st. A default by the world’s largest economy 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.
When a newly elected Republican majority in Congress delayed raising the debt ceiling in 2011, the US credit rating was downgraded for the only time in history. The dispute over the upper limit is usually fought bitterly until the last minute. So far, there has not been a serious payment default.
Biden was open to talking to Republicans about cuts, “but not under the threat of a default.” The Democrat also did not rule out canceling upcoming trips abroad if there was no solution to the dispute. However, the National Security Council’s communications director, John Kirby, expressed optimism yesterday that this will not be necessary. “We plan to go ahead with this trip as planned,” he said. At the moment there are no plans to shorten the trip. Kirby said that for any trip the president takes — no matter when or where — events at home could influence planning.
Source: Stern
I have been working in the news industry for over 6 years, first as a reporter and now as an editor. I have covered politics extensively, and my work has appeared in major newspapers and online news outlets around the world. In addition to my writing, I also contribute regularly to 24 Hours World.
