Democratic President Joe Biden and the Speaker of the House of Representatives from the Republican Party are meeting on Monday to continue negotiations on limiting the federal debt.

The parties have less than 10 days to reach an agreement that will allow the US to continue paying its bills.

“My position has not changed. Washington cannot continue to spend money that we do not have,” McCarthy, the leader of the Republicans on this issue, said on Twitter after a telephone conversation with the leader of the Democratic Party.

“We will meet tomorrow in person to continue negotiations,” he announced, information quickly confirmed by the White House.

However, according to the President himself, the first advance was presented during a telephone conversation between the two men on Sunday. “It was good [το τηλεφώνημα]we’ll see you again tomorrow,” the White House resident said.

Mr. Biden warned via Twitter that he would not accept a deal “that would protect billions (dollars) of subsidies to major oil companies while putting the health care of 21 million Americans at risk.” Or it will protect tax avoidance schemes for the rich, jeopardizing food aid for 1 million Americans.”

“America has never defaulted on its debts. And never will,” he later added from his plane, returning from Japan, where he attended the G7 summit in Washington.

Cost reduction

Like almost all major economies in the world, the United States lives in debt. But there is one American peculiarity, and that is the privilege of Congress to vote to approve an increase in the maximum national debt that the government of the world’s largest economy is entitled to.

This year, the Republicans refuse to raise the famous “hat” unconditionally: they demand a sharp reduction in public spending in order to give the go-ahead. Democrats reject this. Each side blames the other for the situation.

Joe Biden sharply criticized the “extreme” claims of the Republicans in Japan Sunday, stressing that “a lot of what has already been proposed is simply, frankly, unacceptable”, appreciating, however, that a solution can still be found.

Deals on this issue are usually made at the last minute, but the country has little time to avoid the risk of default. This unprecedented situation could have potentially devastating consequences for the US economy, if not for the global economy.

Critical time

The largest economy in the world will be unable not only to pay bills and wages, but also to its foreign creditors.

For the first time, holders of US Treasury securities, considered the safest in the global financial markets, will not be able to receive interest-free loans.

This will happen from June 1, unless the borrowing limit is increased, Treasury Secretary Janet Yellen has been warning for several weeks now.

He also appears to have ruled out resorting to the 14th Amendment to the Constitution, which President Biden mentioned, which could theoretically circumvent the commitment to raise the borrowing limit from Congress.

But it doesn’t look like it can be “used appropriately in these circumstances given the legal uncertainty surrounding it and given the short timeframe” to find a solution, Ms Yellen said on Sunday.

“Big Step Back”

There was optimism midway through last week after Democratic and Republican leaders met with President Biden at the White House.

But the proposal presented on Friday by Republican negotiators was “a big step backwards,” US presidential spokeswoman Karine Jean-Pierre said, describing the “package of extreme partisan demands” put forward.

And he pointed the finger at Republican leaders who depend on Donald Trump supporters, accusing them of “for the first time in their history threatening to bring our country into default.”

Mr. McCarthy also spoke Saturday night of a “step back in the talks” but from the White House’s perspective, complaining that the “left wing of the Democratic Party” is now “at the helm.”

Deadlock Cause: Republicans are demanding federal spending cuts to 2022 levels. In other words, $130 billion in government spending cuts, which is a red line for Democrats.

The Biden administration is proposing to cut spending while raising tax rates for the wealthiest Americans and corporations currently enjoying tax breaks or refunds. Republicans reject this.

Source: APE-MPE, Reuters.