Negotiations to avoid US bankruptcy stop, and its continuation is uncertain

US media reported today that negotiations to raise the US debt ceiling had stalled less than two weeks before a possible government bankruptcy. And one of the Republican negotiators in Congress said that the talks are not making progress at the present time, and that they need to be suspended, after which President Joe Biden’s team came out with a statement about the significant differences between the positions of the two parties. Wall Street stocks erased early gains and began to weaken in light of these developments.

Without raising the debt limit, the federal government may not have the money to pay its obligations on June 1. What exactly this scenario would bring is not clear, because it has never happened yet. However, the US Treasury Department, together with economists, has repeatedly warned that insolvency will have dramatic effects not only on the US economy. To avert that scenario, Biden has met twice this month with leaders of both houses of Congress, and behind-the-scenes meetings have taken place between Republican negotiators and the president’s Democratic administration.

“It’s time to take a break, because it’s simply not useful,Congressman Garrett Graves, who was appointed by House Speaker Kevin McCarthy to lead the Republican side talks today, said after a new round of talks. He described the current state of negotiations as:Does not make senseThe unnamed White House official then said the two sides’ positions on budget issues differ greatly and that continuing talks would be difficult.

According to the information The American media has halted the negotiations and it is not clear when they will resume. The Washington Post writes that pauses in negotiations are seen in political circles as a potential part of negotiating strategy. In this way, McCarthy and Biden could try to reassure their voters of that He vigorously defends his party’s priorities“.

The debt ceiling is set by Congress, which has moved or suspended the limit several times in the past while the national debt has ballooned under both Democratic and Republican presidents. The Republican majority in the House of Representatives is now making such a move conditioned on government spending cuts and the removal of some programs from Biden’s domestic agenda. Biden insists that the debt ceiling must be raised without the current austerity measures, as was the case under his Republican predecessor, Donald Trump. At the same time, he presents the current negotiations as a separate discussion on budget policy.

In response to today’s developments, the White House also responded by saying that a deal is still possible if both sides negotiate in good faith and accept the fact that they won’t get everything they want. In recent days, Biden has emphasized that the United States will not become insolvent, but a compromise solution to avoid a crisis scenario has not yet emerged. The president has signaled his willingness to negotiate tighter social benefit payment standards, but instead of the broad cuts proposed by Republicans, the president is promoting tax increases with the goal of reducing the deficit.

The congressional math further complicates an already complex dispute. The Republicans have a slim majority in the House of Representatives and it was not easy for McCarthy to unite his colleagues behind the initial negotiating position, and in the Senate the Democrats have a majority of 51 votes to 49. As Reuters writes, it will therefore be difficult to agree on a measure that can gain sufficient support in Both houses.

House Speaker McCarthy said earlier that the agreement needed to be reached by the end of the week in order for it to be confirmed by Congress in due course. Exactly how long lawmakers have left is not clear, as Treasury Secretary Janet Yellen put it.X date“It could happen even a few days after the beginning of June.

However, the current situation is causing tension in the financial markets. After news of the trade breakdown, the benchmark S&P 500 moved from a 0.3 percent gain on the day to a 0.1 percent decline before extending losses. The Dow Jones and Nasdaq Composite indices also fell.

Source: Reuters, CTK, Bloomberg