Debt ceiling drama shakes US politics again

Beatriz Pascual Macias

Washington, July 24 (EFE). The drama about increasing the debt ceiling has returned to US politics in recent days due to the Republicans’ refusal to increase the country’s debt before August 2, at which point the government will have to take extraordinary measures to pay its bills.

Disagreements between Democrats and Republicans could have huge repercussions on the global economy and on US President Joe Biden’s agenda.

In the final hours, US Treasury Secretary Janet Yellen warned Congress that on August 2 it will have to take “certain extraordinary measures” to prevent the administration from failing to meet its obligations in the event that Republicans and Democrats do not. reach an agreement.

Specifically, if that happens, the federal government will have to shut down — as it has done three times in the past decade — or it could default.

Given that possibility, in a letter sent on Friday, Yellen told lawmakers that at the end of July, the Treasury would suspend the sale of bonds, the way the United States finances its debt.

This would be just one of the first “extraordinary measures” the Treasury could take to continue paying bills on time.

To get cash, the Treasury can also suspend investments in pension programs or borrow directly from those funds, actions it has already taken on several occasions in the past that then lengthened the executive’s ability to pay for months.

But the situation is different this time because the administration is spending a large amount of money on programs to keep the economy afloat due to the impact of the coronavirus.

Indeed, in his letter, Yellen acknowledged that there was “uncertainty” about how long these “extraordinary measures” could last because, in the “challenge” of forecasting government payments and revenues months into the future, the “uncertainty” generated at the cost of the measures added The catalyst for the epidemic.

According to an analysis by the Congressional Budget Office in July, these “extraordinary measures” will allow the United States to get cash until October or November, when the dreaded suspension of sovereign debt payments occurs.

The United States had never been there before, but it was close.

In 2011, with Barack Obama in the White House, the then-Republican majority in the House of Representatives refused to pass a law to increase the debt ceiling, unleashing chaos in the financial markets and downgrading Standard & Poor’s. State solvency note.

That episode lingered in America’s memory and was the first thing that came to mind for many when Senate Republicans on Wednesday threatened to vote against raising the debt limit unless Democrats came up with a series of scraps.

“I can’t imagine a single Republican vote to increase the debt ceiling after what we saw,” Senate Republican Leader Mitch McConnell said candidly during an interview with Punchbowl News published Wednesday.

The Republican Party, traditionally considered the political force of fiscal discipline, agreed to add 7 trillion to the country’s debt during the administration of Donald Trump (2017-2021); But he has now argued that Biden’s increased spending due to the pandemic is putting the country in a dangerous financial position.

Democrats responded with anger, with their Senate leader Chuck Schumer calling McConnell’s comments “cynical” and “a bit of a disgrace.”

“This debt is the debt created by Trump,” replied Schumer’s room, which considered that McConnell was using US debt for his “political games.”

This debt ceiling setting, which pushes the United States off a cliff every few years, happens because the government spends far more money than it gets in federal taxes.

In 2021 alone, it is estimated that the government will incur $5.8 trillion in expenditures and have $3.5 trillion in revenue, leaving a shortfall of $2.3 trillion, according to the Congressional Budget Office.

To finance this difference between expenses and income, the Treasury borrows money by issuing debt المال

However, the government can issue debts only to the extent fixed by Congress, which has the power to raise such a ceiling as it sees fit.

It happened, for example, in July 2019 when Congress raised the debt limit until August 2 this year. That’s why, if lawmakers now don’t reach a deal, the government may run out of money to pay its bills. EFE

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