Democrats and Republicans may reach a compromise on the US national debt before June 1

The administration of US President Joe Biden and Republicans in Congress may agree to resolve the issue by raising the national debt ceiling. This was reported by Reuters following the results of the talks held on May 16 between the president and the leaders of the congress. The main discussion was between Biden and the Speaker of the House of Representatives, Republican Kevin McCarthy. The speaker stated that the parties are still far from each other in their positions, but this does not mean an impasse in the negotiations. “It is possible to agree on a deal (on the public debt. – Vedomosti) by the end of the week. It’s not that hard to reach an agreement, we know we won’t default,” McCarthy said. Democrats and Republicans will have to agree before June 1 – this is the deadline after which Washington will begin to report a default.

President Biden agreed with McCarthy. He stressed that both sides are convinced of the inadmissibility of a technical default, which will “put the economy into recession.” Later, speaking at a May 16 event honoring Jewish Americans, Biden reaffirmed that the administration and Republicans in Congress “will not let America default for the first time in history.” The exact points of a possible compromise have not yet been disclosed, but, according to The Associated Press, topics for negotiations could include the return to the budget of unused $ 30 billion allocated to combat the consequences of the COVID-19 pandemic, the establishment of new budget restrictions, changes in the rules for issuing licenses in the energy sector and increased requirements for recipients of unemployment benefits. The last sentence, AP writes, citing an unnamed Democratic congressman, is especially unpleasant for the party. On May 16, at a meeting of Democratic congressmen, they agreed that this condition of the Republicans was unacceptable.

The discussion around raising the debt ceiling is so important that Biden had to cancel part of his international program in order to pay attention to negotiations on this issue. On May 17, AP reported that the president would not visit Papua New Guinea and Australia and would not attend the Sydney summit of the Quad, a four-way strategic dialogue between the US, India, Japan and Australia. Later, the Australian authorities canceled the summit altogether. “Because it [вопрос с госдолгом] must be decided before June 1 – otherwise there will be quite serious consequences for the US economy, which will affect the global economy – he [Байден] understandably compelled to make this decision,” said Australian Prime Minister Anthony Albanese.

The problem with the US national debt has become acute again, after it rose to $31.4 trillion in January (144% of GDP in 2022), thereby reaching the threshold set in 2021. Democrats and Republicans are usually relatively easy to agreed on a new increase in the threshold, but this time the disputes over the public debt turned into a severe inter-party conflict. Democrats led by President Biden demanded that the national debt ceiling be raised, as usual, without obligations. Republicans, who hold the majority in the House of Representatives, insisted that raising the ceiling should be linked to the government’s commitment to cut spending.

At the end of April, Republicans approved a bill that, in exchange for raising the ceiling to $32.9 trillion, would reduce government spending by a total of $4.5 trillion over a decade, as well as limit annual government spending growth to 1%. Such an initiative was met with hostility by the Democrats who control the Senate, and President Biden refused to negotiate with McCarthy about the public debt, demanding an immediate increase in it and threatening to veto the Republican bill.

Republicans and Democrats are indeed approaching a compromise, says Alexei Naumov, an expert at the Russian International Affairs Council. The unwillingness of both parties to end the conflict with a default is obvious. Republicans, the expert continues, only want to put pressure on the Democrats in order to get the maximum political benefit, but at the same time not to overdo it and not lead to a real default. McCarthy and his associates are not interested in a real collapse of the US economy, because then their electoral prospects will suffer. The very issue of public debt, the expert recalls, has been and remains political, for the American leadership to solve it, it is enough to say “yes”. As for the amount by which the ceiling can be raised, Naumov estimates it at about $500 billion. The last increase in 2021 was $480 billion, and it is quite logical to expect about the same increase.

The parties cannot fail to agree on the national debt, because none of them wants a US default, says Fyodor Lukyanov, editor of Russia in Global Affairs magazine. According to him, the heavy discussion around the national debt is nothing more than a tough and skillful political bargaining between Republicans and Democrats. This clash between the parties has taken such a sharp turn because of the increased amount of the debt itself, as well as because of the balance of power that has developed following the results of the last elections. If one party controls the White House, and the second – the Congress, then such conflicts will occur in any case, sums up Lukyanov.