Washington | Time is running out again in the United States to find an agreement on the debt ceiling, and avoid default, but calls are increasing for a long-term solution by reforming, or even eliminating, this system.
The elected officials of the US Congress are working on it, “several proposals” for law have been tabled in this regard, said the Democratic leader of the House of Representatives Nancy Pelosi this weekend, on the CNN channel.
The urgency of the moment, it is the gigantic investment plans of Joe Biden, which must be the markers of his presidency, and which could be released this week.
A temporary solution to the debt ceiling, which fixes the maximum amount of debt that the country can reach, and will be reached in early December, could be part of the lot. Democrats hope to secure an agreement from Republicans, who have opposed it so far, so that they do not have to shoulder the responsibility of raising the amount alone.
When this ceiling is reached, it is impossible to borrow, and as soon as the liquidity dries up, it is the default. An unprecedented scenario so far.
But faced with this recurring risk, a reform of this system, which has become an argument for political blackmail, now appears, for many elected Democrats and economists, as an essential measure.
The International Monetary Fund itself recently urged the world’s largest economy to put an end to political psychodramas that are “certainly not useful” to the smooth running of the economy.
Its chief economist, Gita Gopinath, insisted on the need to find “a longer-term solution”, such as “automatically increasing the ceiling”, or replacing it with a “medium-term budgetary objective”.
A handful of countries
One of the solutions could be to transfer the decision to the Secretary of the Treasury – Minister of Economy and Finance – so that it is decorrelated from political battles.
Two elected Democrats in the House of Representatives, John Yarmuth and Brendan Boyle, tabled a bill to this effect at the end of September.
The Secretary of the Treasury, Janet Yellen, indicated, like Nancy Pelosi, that she supported this text.
This is to avoid “a situation where we could be unable to pay the bills resulting from these past decisions”, had justified the minister of Joe Biden, September 30 during a hearing in Congress.
Because, in practice, it amounts, for elected officials, to vote twice for the same expenses.
“Congress has already approved the spending,” but must “vote a second time” for the debt ceiling, said Steve Pressman, professor of economics at Monmouth University, in an interview with AFP.
“Everything is political,” he lamented, citing a “good reason to get rid of this stupid thing.” It is economically dangerous, it is useless and creates more problems than it solves ”. “We are spending too much time and too much effort,” adds the economist.
The debt ceiling exists in “only a very small handful of countries,” Pressman explains. Especially in Denmark, where “the ceiling is so high (…) that there is no risk of approaching it during the next century”.
“Eliminate the threat”
Some call for going even further, and purely and simply abolishing this mechanism, as advocated by four elected Democrats, Congress, in another bill.
“We should eliminate the debt limit to permanently lift the threat of default and focus on the urgent work that the American people expect from Congress,” said one of them, Senator Michael Bennet.
The House of Representatives “will study the possibilities to eliminate the threat posed by the long-term debt ceiling,” had assured the number two Democrats in the House, Steny Hoyer, in a letter sent on October 16 to his colleagues.
He had given no further details, indicating only that a vote in the House could take place “as early as this month”.
At the same time, Democrats and Republicans must deal with the emergency, while Congress has only a few weeks left to set a new ceiling, or suspend it for several months, or even a year or two. And avoid, once again, a default