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America is temporarily spared from defaulting on its debt

America is temporarily spared from defaulting on its debt

The US Congress passed Tuesday A bill to raise the public debt ceiling for the United States Until the end of the year, in a temporary measure to avoid the largest economic power in the world, the risk of falling, for the first time in its history, into the pit of default.

After the Senate passed the bill last week, the House of Representatives on Tuesday approved the text thanks to its Democratic majority, with 219 deputies voting in favor of the bill and 206 against.

The text raises the country’s public debt ceiling by $480 billion, which will allow it to meet its financial obligations until the end of December and even early next year.

With its approval in Congress, the text will be transmitted to President Joe Biden, who will sign it immediately, according to the White House.

This law temporarily removes the specter of default from the United States and its catastrophic consequences for the giant economic power and the rest of the world.
This progress did not come without turmoil, as the text was the subject of endless debate in the Senate, which finally approved last Thursday’s compromise.

A very dangerous maneuver

In fact, Republicans have refused to agree to any move to raise the debt ceiling because they assert that it would be tantamount to giving Joe Biden a blank check to fund his two massive investment plans.

The two plans have not yet been approved by Congress, and raising the debt ceiling will mainly be used to repay borrowed amounts, including thousands of billions of dollars spent under the presidency of Donald Trump.

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When offering an interim solution to avert the debt crisis, Senate Republican leader Mitch McConnell urged Democrats to find a permanent solution themselves by December using a complex legislative path.

But President Biden’s camp has so far refused to use this “very dangerous” maneuver for religion.

The text, approved Tuesday, only delays until the end of November a parliamentary battle that promises to be tough over US finances.

The high probability that the US will plunge into the same problem again in December does not reassure institutions and markets.

US Treasury Secretary Janet Yellen said on CNN last week that December was a “short respite” and “the long-term uncertainty continues.”

For her part, Democratic House Speaker Nancy Pelosi issued a warning Tuesday before the vote, saying that if the long-term debt ceiling is not raised consistently, the impact will be “enormous” and the United States in particular will witness “six million jobs lost.”

“A default will cause a shock wave in all global financial markets,” she added.

Pelosi also expressed her hope for a long-term, “bipartisan” agreement. But she noted that in the meantime, “we will vote on a law today that will accompany us until December, with the hope that by then people will realize the challenges.”

The International Monetary Fund’s chief economist, Gita Gopinat, said the United States should find a “long-term solution” to managing its debt.

She said in a press conference on the occasion of the publication of the Fund’s global economic outlook, that “this could happen by replacing the debt ceiling with a kind of budget target in the medium term” or by “automatically raising the debt ceiling.” She added that “the constant repetition (of this problem in Congress) is of course not beneficial” for the proper functioning of the economy, noting that this creates a lack of confidence, especially in the markets.

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“So I think this should be fixed,” she concluded.