Biden will need the Congress in order to avoid a default
The United States has money until June. That its economy could default would add fuel to an international fire that has been burning for some time in the heat of the pandemic and all the collateral effects of the Russian invasion of Ukraine, including the "shock" of oil prices and other basic inputs.
The alert has been issued by the Treasury Department, after warning that the national accounts have reached their debt limit. For President Joe Biden's government, this means its first big test of fire -this year- given that the Democrat will have to negotiate with the Republican majority in the House of Representatives to suspend the limit or, in any case, increase it. The debt ceiling is 31.4 trillion dollars.
What do you mean by debt ceiling? Also called the debt limit, it is a ceiling on the total amount of money the Federal Government is allowed to borrow through Treasury securities, such as bills and capitalisation bonds, to meet its financial obligations.
It will not be a quick or easy negotiation for Biden, who is going through a pre-election year, in the midst of growing pressure from a group of Republicans who do not take kindly to the White House granting aid and funds left and right so that the Kiev government does not succumb to Putin's war.
This coming 24 February will mark the first year of the invasion, and since then Washington has granted the government of Ukrainian President Volodymir Zelensky substantial resources to support a European country, as it has not done since the end of the Second World War, as was the case with the Marshall Plan to rebuild Allied Europe.
According to data provided by the Council on Foreign Relations, last year Ukraine received - at least until November - an amount of $47.9 billion. The White House sent Kiev both humanitarian aid (9.9 billion dollars); financial aid (15.1 billion dollars) and military assistance with armaments (22.9 billion dollars) and a small portion of arms credits.
Before Zelenski, President Biden has publicly reaffirmed his commitment to continue supporting Ukraine despite having lost political strength in Congress: as a result of the 8 November elections, the new composition of the lower house is 222 Republican legislators against 212 Democratic congressmen and one seat remains vacant.
And as the war drags on, there will be greater demand for weapons and assistance for Ukrainian troops to resist the Russian siege, the scenario could turn against him and become Dantesque for a Biden who, moreover, intends to run for the presidency again in 2024.
For the time being, if the House of Representatives does not manage to unblock the necessary support for extending the debt limit, the global economy could this time suffer volatility derived not from the pandemic or the war, but from the failure of the US to meet its financial commitments, for example, the immediate interest payments of the world's largest debtor.
Is this unusual? No. The Treasury Department itself explains that, since 1960, the US government has been forced to ask Congress to raise its debt limit in order to meet all its obligations. Since then, it has done so some 78 times.
The Government Accountability Office recalls that the US government has never defaulted on its bills so far, even though the debt ceiling has been raised 22 times between 1997 and 2022.
Biden will have to be diligent with his right hand because he will have to convince his opponents. In this regard, CNBC reports that the White House will prioritise negotiations on a new bill to raise the debt ceiling.
The unusual thing would be for the House of Representatives not to give the government the go-ahead to extend it, and it could do so for political reasons in order to create chaos for the incumbent ruler if he does not belong to his own political party. A condition that Biden fulfils, spiced up by a sour climate of social tension and political confrontation.
The Republicans themselves could exhaust all the deadlines to annoy the current occupant of the White House; even to force him to accept a series of spending cuts.
For the time being, Janet Yellen, the head of the Treasury, announced a series of necessary and extraordinary measures in the face of the US government spending ceiling situation; the first related to the temporary suspension of debt issuance for the Civil Service Retirement and Disability Fund - at least until 5 June - and the suspension of all payments from the Postal Service Retiree Health Benefits Fund.
"The length of time the extraordinary measures may last is subject to considerable uncertainty, including the challenges of forecasting government payments and receipts in the coming months," Yellen said.
The Treasury chief will prioritise paying federal government bills such as payrolls but will suspend payments from several funds. She is trying to secure existing liquidity for the first half of the year. Moreover, what is at stake is that the US, the world's largest debtor, will not be able to pay its debt commitments and repayments to third parties and countries.
"A default on the government's obligations would cause irreparable damage to the US economy, to the livelihoods of all Americans, and to global financial stability," Yellen warned.
The reality is that even the Republicans don't understand each other. There is not a sufficiently cohesive force because there persists a wing within Congress that is much more radical and moves on the far-right spectrum of the Republican wing.
It took the Californian, Kevin McCarthy, fifteen attempts to convince his own Republican co-religionists (the more reluctant Freedom Caucus members) to elect him Speaker of the House of Representatives, replacing the Democrat, Nancy Pelosi.
McCarthy has the delicate task of managing the legislative agenda and getting all the issues related to initiatives, laws and meetings with lobbyists off the agenda. His position is so important that he is second in line for the Presidency after the Vice President, Democrat Kamala Harris.
As speaker, he will have to be very capable of bringing together his own group, considering that one party does not want him at the helm: the BBC revealed that Republican legislators Matt Gaetz, from Florida, and Mike Rogers, from Alabama, came close to coming to blows over their disagreements over McCarthy.
To negotiate with a Biden who will want to raise the debt ceiling, Republicans will first have to agree among themselves on core issues related to spending cuts.
There will be relentless pressure on the president, despite the economic volatility that may ensue, to use his cuts programme as a bargaining chip. Some Republican lawmakers are pushing for cuts in government programmes, both Social Security and Medicare.
They did so in 2011, under then-President Barack Obama, when Republicans secured spending cuts of more than $900 billion in exchange for raising the debt limit.
Lawmaker McCarthy would like even more budget transformation, telling Fox News Channel: "Let's sit down and change our behaviour for the good of America. Because what we're going to do is bankrupt this country and bankrupt these entitlements if we don't change our behaviour today".
There are also voices such as South Carolina lawmakers Ralph Norman and Texas lawmaker Chip Roy, who are demanding spending cuts before raising the US debt ceiling again.
Since 7 January, Republicans in the House of Representatives have been threatening Biden with an investigation into his administration, his son Hunter Biden and his business dealings, and an enquiry into official papers found in Biden's home. A very similar situation to that of former President Donald Trump with official papers found in his Mar-a-Lago mansion, 48 folders were found on him.
There is also a tense economic situation: the IMF estimates a GDP of 1% this year; average inflation is expected to be around 4% and the Federal Reserve itself anticipates that unemployment claims in the US will grow by 4.6%.
In addition to this economic slowdown bordering on recession, there is a tense social climate, discontent dominates among citizens and confrontation is increasingly evident for various reasons, not only racial, but also ideological and political.
Biden's foreign policy has not made good friends either: friction continues with North Korea; so far he has not been able to return to the nuclear agreement with Iran; with China, the friction has also escalated and the trade war initiated by Trump has not abated. So far, the most delicate stance, and the consequences of which are unclear, is the open and decisive support for Zelenski's government in the face of the invasion to prevent Ukraine falling into Putin's hands.
For the time being, Biden is also waging his internal war against Republicans determined to make his life impossible for the rest of his term (there will be elections in 2024) and they are already planning legislative manoeuvres.
From the White House, his economic plan seeks to reduce the inflation that is arriving through high energy prices as a collateral effect of the Ukraine-Russia war. On 24 February last year - the very day the invasion began - a gallon of gasoline cost 3.54 dollars; by 14 June last year it had risen to 5.02 dollars and the escalation threatened to double February's price. Biden ordered the use of reserves to lower costs and the price of gasoline, as of 24 January, sold for $3.42.
This manoeuvre, which Biden boasts about on a recurring basis, could soon be eclipsed, as the US president said on his Twitter account @POTUS a few days ago: "Our oil reserve releases worked to lower prices and we have a plan to refill the reserve at a profit for taxpayers. House Republicans are trying to weaken that critical tool. And gas prices would go up because of that."
What's it all about? Republicans are discussing a national sales tax to try to abolish the Internal Revenue Service, which Democrats oppose. Lawmaker Earl Carter has introduced such a bill, which also calls for a 23% national sales tax, which some private agencies are proposing at 30% once income, inheritance and payroll taxes are eliminated.
Biden has expressed his displeasure because this measure, if the so-called Fair Tax Act were to go through, would raise the price of all goods and services, affecting the lower middle class and the poor. No, Biden will not have it easy