Biden is optimistic despite the shadows on the debt ceiling

Biden in Delaware the day before had expressed hope to reach a meeting point with the Republican majority in the House of Representatives to raise the discount ceiling and prevent the dreaded “default” (non-payment) with unforeseen consequences for global markets.

The Hill newspaper pointed out that the scenario is similar to the scenario 12 years ago, when a Democratic president (Barack Obama) faced a Republican House in a battle that lasted for months, which put the country on the brink of default and caused the first downgrade in the credit rating in national history.

Biden and House Speaker Kevin McCarthy (R-Calif.) are seeking common ground on the issue, but they are operating in a much more difficult environment than the one experienced by top negotiators more than a decade ago.

Lawmakers, economists, and political observers of all stripes agree that, among other factors, the strong polarization and inflexibility of representatives of both major parties plays a role.

Thomas Kahn, who was a senior advisor to Democrats on that legislature’s budget committee, argued for three reasons for sounding alarm bells.

Republicans have shifted further to the right in the past decade, and the cuts they demand are sharper than they were in 2011; He emphasized that the conservatives in the House of Representatives, who were promoted by former President Donald Trump, are more willing to accept default, and that the delicate position of McCarthy, hostage to concessions to the most difficult wing in his seat.

It wasn’t just Republicans who hardened their tactics this year, however. Biden himself, unlike Obama in 2011, said he was unwilling to negotiate huge spending cuts to raise the debt ceiling, which stands at $31 trillion. Accessed January 19th.

Obama clashed that year with then-Speaker of the House John Boehner (R-Ohio), who came to power that same year on the back of the Tea Party movement and demanded deficit reduction while rejecting any increase in the budget limit. Government borrowing without sharp cuts in federal spending.

Although last-minute defaults were prevented at the time, distrust in the markets persisted, prompting Standard & Poor’s to downgrade the US’s triple-A credit rating for the first time in its history.

G/DFM