US President Joe Biden and House Speaker Kevin McCarthy failed to reach a deal for the debt ceiling a week before the deadline, June 1st, while stock markets tracked losses in Wall Street.
Negotiations between President Joe Biden and Congressional Republicans appear to be heading towards a last-minute resolution, as both sides have been engaged in talks since Sunday to agree on raising or suspending the debt ceiling to cover current US expenditures.
The discussion is determining the overall spending limit for the upcoming year and determining the duration for which the debt ceiling should be raised before needing to increase again.
House Republicans are demanding spending reductions as a precondition for their approval to increase the country’s debt ceiling beyond $31 trillion. At the same time, Democrats contend that Congress has already utilized the funds and should be permitted to fulfill its obligations of repaying the nation’s debt holders.
With the approaching X-date, economists, political analysts, and possibly the US Treasury, as reported by the media, are now exploring the potential options for policymakers in case the US exhausts its funds to meet financial obligations.
Analysts predict that even if the Treasury takes measures to avoid a complete default by temporarily limiting government spending, reaching the debt ceiling would likely lead to a sharp decline in financial markets and a surge in mortgage interest rates.
Investors expressed growing concerns over stalled US debt ceiling negotiations, causing stock markets to mirror the losses witnessed on Wall Street.
The initial optimism observed in trading floors earlier in the week has now been replaced by apprehension, as several Republicans are raising doubts about the early June deadline and suggesting that the country is still far from facing a cash shortage.
According to Treasury Secretary Janet Yellen, a resolution must be reached by June 1st to avoid the United States defaulting on its debt payments. This situation, economists caution, could lead to significant turmoil in the global economy and financial markets.
For any agreement reached by the negotiators to become effective, it must be approved in both the House and the Senate. This process takes time, so it is crucial to reach a deal before June 1st to prevent reaching a critical date known as the X date.
Miroslava Salazar with AFP
