Debt ceiling poses danger to US recovery
More debts = more economy
It is the week of truth for Joe Biden: the future of his reform plans hangs by a thread, his government has big money worries.
The US Congress is facing a series of decisive deadlines. If Republicans and Democrats don’t compromise quickly, the US government will have to close and there may not even be money to pay the bills next month. At the same time, time is pressing for the ambitious plans that Joe Biden announced at the beginning of his presidency. His own party members threaten to block investment in infrastructure.
And so Biden and his game on four chessboards have to try to save their asses at once. Before midnight on Thursday, Congressmen must first agree on a temporary budget, to prevent the government from closing on Friday due to lack of money. Civil servants would then be sent home without pay. A similar shutdown took 35 days at the end of 2018.
Republicans blocked such a temporary budget until now, because Democrats also want to deal with an increase in the so-called debt ceiling with the same vote. That’s the limit to the amount the government can borrow under U.S. law.
The debt ceiling is often raised in order to finance the rising public debt. Normally, this is a formality that both parties agree to. But Republicans in Congress are now throwing their asses at the crib. They say that Democrats should take care of it themselves, because they want to spend a lot of money on social services.
Party Leader Mitch McConnell wants to portray Democrats as big spenders with a hole in their hand. ,,If they want to tax, borrow and spend historical sums of money without our input, they’ll have to raise the debt limit without our help,” McConnell said in the Senate last week.
That is not a fair presentation. The money is needed to cover existing debts incurred by both parties, not for new expenses. In recent years, the US borrowed for coronavirus support and a tax cut under Donald Trump.
If Congress does not allow more debt, the country will not be able to pay its bills in mid-October, Finance minister Janet Yellen warned. That’s never happened before, and would be a “financial armageddon,” It sounds on Wall Street. Seniors then receive no old-age benefit, Soldiers no salary and amounts remain open to creditors.
“It would be disastrous for the U.S. economy, the global financial markets, and millions of families and workers whose financial security is at risk by delays in making payments,” said Yellen.
Democrats can use a special procedure to circumvent the Republican obstruction. But they do not want to be solely responsible for the debts that the two parties have incurred together. Moreover, such a process would take too much time. Banks are beginning to fear that the parties will not agree and that the US may become a defaulter for the first time due to political wrangling.
At the same time, on Thursday, the House of Representatives will also vote on Biden’s plan to invest $ 1000 billion in infrastructure. But progressive party members are in danger of getting bogged down if a second package of ambitious plans for social and green investments is not adopted first. They fear otherwise nothing will come of it.
Democrats do not agree with each other about spending on climate measures, better childcare and partly free higher education. Some consider the investment of 3500 billion dollars proposed by Biden to be far too expensive. Biden wants to pay it with higher taxes for the rich, but for now he does not have enough support in his own party.
If we manage to meet all the goals and deadlines this week, the country will be ‘in top shape’, Biden said. But if it fails, major financial dramas threaten and he has little success stories to offer voters when they get to judge Congress next year. He’s been losing support in polls for the past few weeks. A small majority of Americans are dissatisfied, since the botched withdrawal from Afghanistan.
Party Leader Pelosi insists that the Infrastructure Act will be passed this week, and that the government does not have to close. ,You know me, I’m a born optimist” ” Joe Biden himself told reporters. ,We’re gonna get it done.”