A budget dispute with Republicans would degenerate into an economic and financial crisis. Despite the recent positive signs, the US President is now cutting back on essential trips.
Washington (AP) – US President Joe Biden has canceled planned visits to Australia and Papua New Guinea due to the impending budget crunch in the United States. The White House said Biden would return to the United States for a meeting with congressional leaders as soon as Sunday after the G7 summit in Japan ends. He wanted to ensure that Congress took timely action to prevent a default.
Biden spoke to Australian Prime Minister Anthony Albanese to let him know he was postponing his trip to Australia, the White House said. Additionally, Biden invited him on an official state visit at a later date. The White House has also contacted the office of Papua New Guinea Prime Minister James Marape to update him on the changes.
approach sign
The backdrop is that the US government is in danger of defaulting within days unless the Biden administration agrees with Republicans in the US Congress to raise the debt ceiling. The argument has dragged on for months. However, after the high-level meeting at the White House, there were signs of rapprochement. Biden said “there is still work to be done on some tough issues, but he is optimistic that there is a path to a responsible, bipartisan budget agreement.” However, both Republicans and Democrats should be prepared to compromise.
In the US, parliament sets the debt ceiling at irregular intervals and determines how much money the state can borrow. The current debt ceiling is around 31.4 trillion US dollars (about 28.6 trillion euros). In the meantime, this debt ceiling has been reached and the US Treasury has had to tap into its capital reserves – as the US is now no longer allowed to take on new debt to pay its bills. Biden and his Democrats need Republicans in Congress to raise the debt ceiling. However, they oppose increases without significant savings in certain government spending.
The danger of the global financial crisis
US Treasury Secretary Janet Yellen warned of a potential government default could occur as early as June 1. The failure of the world’s largest economy could trigger a global financial crisis and a severe economic downturn.
The US would then no longer be able to pay most of its bills – millions of people could lose their jobs as a result. When the newly elected Republican majority in Congress held off raising the debt ceiling in 2011, the US credit rating was downgraded for the first time in history.
Biden has tried to find a solution to the dispute in various rounds of negotiations in recent weeks – so far without success. Both he and Yellen warned of “disaster” if the government did default.
G7 summit at an uncertain time
Apart from the US, the G7 countries also include Germany, France, Italy, the UK, Japan and Canada, as well as representatives of the European Union. The G7 group of heads of state and government meet in Hiroshima from Friday to Sunday (19-21 May) for this year’s summit. In addition to Russia’s war of aggression in Ukraine and global economic issues, the summit must also address China’s role.
Afterward, Biden had actually planned visits to the island nations of Papua New Guinea and Australia. In Sydney on May 24, he wants to attend a meeting of the so-called Quad Alliance along with the heads of government of Japan, India and Australia.
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