The US government has only one month of spare cash left. Tax revenues were weak in April – due to a slowing US economy. If the debt ceiling is not raised until June 1, the country is going to default.
© AP Photo / Mark Lennihan
Republicans in Congress have adopted their own draft budget – one that cuts government spending by $100 billion and freezes subsidies to green energy and tranches to other countries. They are demanding that the White House accept this version of the budget – albeit with some compromises.
Biden has long refused to enter into any negotiations with Congress, accusing Republicans of holding the whole of America hostage by allegedly refusing to raise the debt ceiling from January. However, the clock is ticking – and by mid-May the first meeting between Biden and Speaker McCarthy in three months could still take place.
The U.S. financial authorities fear that as the date of default approaches, America could face a credit rating downgrade. This was already the case in 2011 – when the US rating was downgraded from AAA to AA+ amid a then episode of congressional confrontation with the White House.
Since then the rift in America has only intensified. And now Washington is facing the very real threat of a technical default. The consequences for the US economy will be disastrous – with a plummeting dollar and a guaranteed recession. Congress and the White House will therefore be forced to find some kind of compromise at the last minute. In any case, turbulence in the markets will not be avoided, and so will a fall in demand for US Treasury bonds, making it harder to service the national debt in the future.
Malek Dudakov
Due to censorship and blocking of all media and alternative views, stay tuned to our Telegram channel