Republicans and Democrats in Congress on Wednesday unveiled a temporary solution to the US debt crisis, saying they would consider a stop-gap measure to increase the country’s debt limit by December.
Potential progress has come after Senate top Republican Mitch McConnell proposed a short-term expansion of the country’s debt ceiling as one of two options for resolving a stand-off that confuses investors and corporate America.
While some Democrats on Capitol Hill immediately rejected the proposal, others expressed support for such a move as a way to avoid economic and financial catastrophe and to reconsider their efforts to pass President Joe Biden’s economic program.
“McConnell is secret. Now we’re going to spend our time against childcare, healthcare and climate change,” Democratic Senator Elizabeth Warren from Massachusetts told reporters after a meeting with members of her party.
White House Press Secretary Jane Saki reacted coldly to McConnell’s proposal, but did not deny supporting it. “No formal offer has been made. A press release is not an official proposal, ”he said.“ We don’t need to kick the cane. “
Senate Senate Democrat Chuck Schumer did not immediately comment. An important systematic vote scheduled for Wednesday afternoon that would raise the NSA limit and avoid a default crisis in just one week – which Republicans had expected – was postponed.
Wednesday’s events are the first sign that members of Congress, and especially Republicans, are feeling the pressure to avoid potentially harmful and self-inflicted U.S. debt defaulters. Republican Senator Lisa Murkowski from Alaska said earlier in the day that she did not want America to “even come to a default” and that McConnell’s plan was “a way out of our jungle.”
However, the details of any short-term agreement still need to be negotiated, and any agreement would suspend the threat to global financial markets and the U.S. economy for several months.
Earlier Wednesday, Biden held a virtual meeting with a group of chief executive and business leaders, including JPMorgan Chase’s Jamie Dimon, Citigroup’s Jane Fraser and Brian Moynihan, seeking help from corporate America in trying to persuade Congress to raise the U.S. orrow limit. Bank of America, as well as Greg Hayes from Raytheon and Pat Gelsinger from Intel.
Fraser warned that the United States was “playing with fire” in its brush against the brush, as he called on Congress and the administration to resolve the crisis as soon as possible.
Damon said the consequences of a potential default could range from a “recession” to a “complete catastrophe” and would reduce U.S. credibility around the world. “At this point, I think we should show American competence, not American incompetence,” he said.
Nasdaq chief executive Adena Friedman added that she was already “beginning to feel the instability” in the financial markets. “Investors don’t really handle uncertainty very well,” he said.
U.S. Treasury Secretary Janet Yellen also attended the meeting. He warned that there was a risk of running out of cash to pay his bills in the United States after October 18 without any increase.
Mature Treasury bills rallied dramatically after McConnell’s speech just after the Oct. 18 deadline. The yield on the four-month bill, which matures October 1, fell 0.06 percentage points to 0.06 percent on Wednesday. As bond prices rise, yields fall.
The $ 4tn market for short-term bills, which rely heavily on U.S. government funding, was largely stalled by this stagnation until the end of last week. But on Friday investors began to pay a risk price that a deal with a debt limit would not be brokered in a timely manner, which increases the risk of default.
Biden has tried to portray Republican opponents of the threshold increase as a “Russian roulette” game with the U.S. economy and financial markets, which has raised tensions between the party’s lawmakers and donors from their allies and the business community.
Republican lawmakers have been insisting they won’t sign to raise the debt limit, binding Democrats’ ambitious spending planning efforts, including the president’s proposed $ 1.2tn infrastructure bill and $ 3.5tn social spending package.
Democrats claim that Republicans are cheating if they vote to lift or suspend the debt limit three times during Donald Trump’s presidency, and that the government needs most of the current orrow to cover spending during the previous administration.
Several lawmakers and former officials have warned that a default would have diplomatic implications for the U.S. government. Six former U.S. defense secretaries, including Jim Mattis, who served in the Trump administration, warned in an open letter to congressional leaders on Wednesday that the default would have “catastrophic consequences” for the U.S. military and the country’s “world leadership position.” ”
The White House Council of Economic Advisers warned on Wednesday that it would take “decades” for the United States to recover if it did not take action.
“Financial markets will lose confidence in the United States, the dollar will weaken, and stocks will fall,” they wrote. “Debt limits should not and should not be used as political football.
Additional report by Eric Platt in New York
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