The meeting between Joe Biden and Kevin McCarthy was “productive”, but an agreement on how to avoid the default of the United States has not yet been reached. While Janet Yellen reiterates the alarm for June 1, when the States may no longer be able to honor their obligations, the president and the speaker of the House in the White House are trying to unblock the impasse that has arisen on the debt ceiling.
After days of tension and interrupted negotiations, a certain optimism transpires. “There is no agreement yet but the meeting was productive, the best we have had so far,” McCarthy said as he left the White House. To those who asked him whether the Americans should prepare for a default, the speaker of the House answered with a resounding “no”. An agreement – he added – can be reached: “Biden and the Democrats want an agreement, a compromise is needed”, he explained, reiterating the line of the Republicans, namely the need to reduce spending.
“The problem isn’t revenue,” McCarthy said, assuring that there is no question of cutting defense spending. To do so “would be a mistake,” she noted.
The meeting with McCarthy was “productive”: “we reiterated once again that default is not an option and that the only way forward is a bipartisan agreement”, highlighted Biden, assuring that the negotiations will go ahead forward to the bitter end with the aim of finding an agreement that can pass the examination of Congress. Any possible agreement will in fact have to be approved by the House and Senate and Biden and McCarthy are aware of the risks this entails. Republicans to the right and Democrats to the left could sabotage the deal and slide the United States into its first default.
The stakes are high for both parties politically given the 2024 election. Observers believe a default would be “political suicide” for both conservatives and liberals, but in a political environment as divided as the current one, twists and turns cannot be excluded.
Wall Street remains on the sidelines, so far oblivious to the tensions and convinced that there will eventually be an agreement. Behind the scenes, however, companies and large banks are preparing for the worst, that is a catastrophic default with unpredictable consequences.
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