For the Speaker of the House of Representatives, there is one certainty: “We have to spend less than last year. This is the starting point,” Kevin McCarthy said as deputies and senators left the capital to spend ten days abroad and the US sail ahead with an iceberg that could sink your economy and send shock waves around the world. If the Republicans do not give in to their claims, the national debt limit has been reached and the country will not be able to meet its obligations. “The Republicans want the American people to make an impossible choice: devastating budget cuts or a devastating default,” said Democratic Representative Katherine Clark.
On Wednesday, the uncertainty prompted the Fitch agency to put the country’s credit rating on “negative rating watch” as June 1 approached, the date the government could run out of money. However, in an optimistic tone, the US president reiterated that his country “will not default”.
McCarthy, who only managed to be elected mayor after 15 votes after concessions to his party’s far right, is using the tactics he suffered by holding Joe Biden hostage to his demands. He has pushed for drastic cuts – $130 billion, according to the AFP – in exchange for his vote to raise the country’s debt limit. The White House has offered to freeze 2024 spending for next year at current levels and cap spending for 2025, but that’s not enough for the Republican.
As proof that not only, or above all, sound records are at stake, but also political gains, presidential candidate Donald Trump praised McCarthy’s role and encouraged him to follow the path of default if Biden does not concede. “It’s a difficult situation. They’ve spent too much money, too much money on nonsense,” he said. During his four-year term, US government debt rose by $7.8 trillion, reaching a record 127.8% of GDP.
4.8 billion. It is the dollar amount that House Republicans want to cut, over a 10-year period, to go along with the debt hike. A document that has no chance of passing the Senate, but does put pressure on Joe Biden.
While Joe Biden takes a dialogical but firm stance, other Democrats are critical of the Republicans. White House Chief of Staff Jeff Zients has pointed to the inconsistency of Republicans wanting to stick with the Trump-era tax cuts, which he says add $3.5 billion to the debt. House minority leader Hakeem Jeffries accused Republicans of abandoning Washington to “risk dangerous bankruptcy in a crisis of their own making.”
Still, a team of Republicans in the US capital continue to negotiate with the Biden administration, while the remaining members of Congress took advantage of next Monday’s holiday honoring the dead fighters to take a 10-day legislative break. However, if a deal is reached in the next few hours or days, representatives will be called to Washington, assured House Majority Leader Steve Scalise.
$31.4 billion, or $29.3 billion, is the total US debt. In hundred-dollar bills, there would be 13 stacks as high as the Washington Monument, the 170-meter-high icon of the US capital, PBS assures.
The debt ceiling hike is unlikely to take effect before June. According to the regiment approved by the Republican majority in January, representatives cannot vote on legislation without first spending 72 hours studying the document. And only then does it go to the Senate. Treasury Secretary Janet Yellen has warned that the government may not be able to meet all its obligations as early as June 1. According to Washington messageanalysts think there isn’t much more than a few weeks of maneuvering.
Joe Biden already warned that a default would be “catastrophic”. But what would it initially mean? Disruptions to federal government operations would impact key areas such as air traffic control, policing, border security and national defense, and food security. “A default could cause widespread hardship as Americans would lose the income they need to survive,” Yellen warned.
According to Wendy Edelberg, an economist at the Brookings Institution, speaking to PBS, the Treasury would follow the hierarchy of debt payments, i.e. prioritize capital and interest. Debt holders such as the Chinese state would be prioritized over millions of retirees and veterans, as well as health care programs, for example.
Q&A
Public debt as a political weapon
What is the debt ceiling?
It is a congressional limit on the amount of money the federal government can borrow to pay its bills, a mechanism that has existed in the US since 1917. Since the government typically spends more than it takes in, Congress often has to raise the debt ceiling to pay for its operations. North Americans compare the scheme to paying with a credit card.
What is Non-Compliance?
If Republicans do not agree to raise the debt ceiling, the government cannot borrow and as a result will default on its obligations, including paying creditors or paying pensions. The US was close to bankruptcy (standard) in 2011, but this never happened. The economic and social consequences would be serious and not only affect the United States.
What is the difference with closing?
The closing (to block) by the federal government for more than a day has already happened four times. It is due to the lack of a majority in Congress to approve funding so that the government can continue to spend money to stay operational. When that happens, most federal workers go unpaid — and sent home — and several services deemed non-essential are shut down.
Is arm wrestling with the opposition new?
No. Since the increase in the debt ceiling must be approved by law, the opposition often uses it to obtain concessions. The U.S. Treasury Department says Congress has approved 78 debt limit increases since 1960. Of these increases, 32 have been implemented over the last 45 years with parallel legislation initiated by the opposition (usually budget or expenditure related). Between 2013 and 2019, congressmen preferred to sidestep the issue by suspending the debt ceiling.
Source: DN
