The country risked finding itself in default of payment on October 18.
The catastrophic risk for the financial world of a payment default by the United States is postponed from October 18 to the beginning of December. The Republican Senate leaders in Washington have agreed with their Democratic colleagues that the latter marginally raise the public debt ceiling in a vote that they will not block.
Read alsoUnited States strapped for resources on October 18 if debt ceiling is not raised
«I have a good new”, Declared the Democratic leader of the Senate Chuck Schumer in the hemicycle by announcing this agreement which runs until the beginning of December. After long hours of negotiations, he said he hoped that a vote on this proposal would be held “from today“. The House of Representatives will then in turn have to approve this measure so that Joe Biden can enact it. This final vote is not expected until next week. “The Senate is moving towards the plan I laid out yesterday to prevent Americans from a provoked crisisBy the Democrats, welcomed the leader of the Republican senators Mitch McConnell. “Republicans and Democrats and their teams bargained all night in good faith».
Debate on increasing the US debt ceiling
Treasury Secretary Janet Yellen had warned that beyond October 18, the US government would no longer have the authority to borrow more because Uncle Sam’s debt ceiling set by the law to 28.400 billion dollars, will have been reached. The United States, like many rich countries, must continually increase its debt to finance its spending and pay the interest on its debts.
US law forces Congress to vote regularly to raise the debt ceiling. This obligatory passage is sometimes used by Republicans in an attempt to demonstrate that Democrats do not care about the unhealthy drift in public spending.
In the absence of a consensus to eliminate this law, the White House has been seeking for weeks by which legislative means either to raise the debt ceiling permanently or to suspend it for several years. The solution announced yesterday does not solve the problem: it only postpones the deadline to the beginning of December, by authorizing 480 billion dollars of additional debt. In the very short term, this nevertheless represents a relief for Wall Street: the global financial system is based on the principle that the US Treasury will always honor its debts. The US stock indices soared as soon as the temporary compromise was announced.
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