It’s a scenario that gives everyone cold sweats: the default of payment that threatens the United States. This means, roughly, that the world’s largest economy would no longer have the means to pay the pensions and salaries of civil servants. And more simply that the state could no longer repay its debt or borrow. Eight million jobs are at stake, according to figures given by President Joe Biden himself. And all countries economically linked to the United States would be caught up in the turmoil. Like in 2015, when Greece’s default shook the European economy.
>> United States: five questions on the risk of a default that agitates the country and threatens the global economy
The only solution is to allow the country to go into ever more debt… American particularity, it must go through a law passed by Congress. In general, it’s like negotiating a larger overdraft with the banker, it’s a formality: in its history, Congress has already raised the public debt ceiling 78 times. The adjustment is made almost every year or every two years depending on the crises – the Covid in particular has caused spending to explode. Twenty years ago, the debt was at 6,000 billion dollars. Today, we are at 31,000 billion dollars (largely twice as much as the debt of all the 27 countries of the European Union) and this threshold was exceeded at the start of the year.
Except this time, the Republicans don’t want to let the money slip away. Led by Donald Trump, they refuse to agree to raising the debt ceiling without compensation. However, if the Democrats are in the majority in the Senate, the Republicans, they control the House of Representatives. Without their green light, everything is blocked.
What they want are drastic cuts in federal spending to return to last year’s level (except for the defense budget, the only one they want to increase). That would mean reducing reimbursements for health insurance, limiting social benefits… and that, among the Democrats, is not acceptable. They propose instead to increase taxes for the wealthy and businesses.
An agreement in extremis will not be neutral
After the G7 in Japan, Joe Biden cut short his tour of Asia to return to the United States and resume discussions. He who said loud and clear a few months ago that he would not make any concessions has already made some. Insufficient, for the Republicans. However, even a decision taken at the last minute can have consequences. In 2011, the only threat of bankruptcy caused the United States to lose their triple A, the best credit rating from the rating agencies.
If the disagreements are insurmountable, Joe Biden has one card left: the 14th Amendment to the US Constitution, according to which “the validity of the United States public debt (…) should not be questioned”, which makes it possible to act as if the debt ceiling did not exist. But it remains to clarify a legal uncertainty on this point, especially since the deadline is very tight. The president, who is also campaigning for his re-election, is walking on a thread.