When it comes to debt ceiling negotiations for the United States, this week is very important for the United States because if Congress does not raise the debt ceiling before June 1, then the United States will default. can do.
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US President Joe Biden, House and Senate leaders from both parties, Democrats and Republicans, met at the White House on Tuesday to discuss how to overcome the economic crisis he created, but no progress was made.
Keep in mind that as early as next month (June), the US government may reach the final statutory limit on the national debt, which clearly means that the Federal Treasury will not be able to obtain additional funds.
After this failure, the economic crisis will be so severe that the United States will not have enough money to pay off the current debt, to pay government employee salaries and pensions, or to pay any government funds. Bill payment may be possible.
Congress could vote to raise the debt ceiling at any time, but Republican members of the legislature would want to do so only if they can win some policy concessions from President Joe Biden and Democrats.
It should be noted that President Joe Biden and his allies have so far refused to be part of these negotiations, saying that they cannot do so under the shadow of the threat of economic collapse.
The meeting itself is already somewhat of a concession for Joe Biden, who has so far ruled out the possibility of discussing the Republican proposals. He had previously insisted that spending and policy discussions be kept separate from the debt ceiling.
Now it is a conflict that could push the country toward economic collapse.
Hitting the debt ceiling means the U.S. government cannot borrow any more money until Congress agrees to raise the borrowing limit. Currently, the US government's borrowing limit is approximately $31.4 trillion.
What are the advantages and disadvantages of this crisis for the two major parties in the United States? Let's take a look at it here. But first, do you know that this is a debt limit problem?
How did the debt limit issue become a battle of egos?
The debt limit was first introduced in 1917, with the aim of giving the government room to raise money during the First World War.
In principle or theory, it provides a way for Congress to control spending.
But the debate over the debt ceiling became damaging over time as it led to both political divisions and the US debt (which has nearly doubled in a decade).
This is partly due to the significant spending by the government during the (2008) financial crisis and the (Covid) pandemic, but it is also the result of the country running a continuous budget deficit since 2001. And it is spending more than its income.
And now the debt ceiling has become a permanent political bargaining chip in American politics.
Controversy over the issue was resolved in 2011 when then-President Barack Obama agreed to cut more than $900 billion in spending, which led to a corresponding reduction in the debt ceiling. happened
Some Republicans are again pushing for spending cuts, which Democrats have rejected.
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What do Joe Biden and the Democrats want?
The debt ceiling is such a sensitive issue that the Democrats are not going to make any political maneuvers. He never even threatened bankruptcy. As in the past, when Republicans refused to raise the minimum wage, expand government-sponsored health care or raise taxes on the wealthy, the Democrats did not stir up controversy.
Now, in response, the Democrats also want the Republicans not to do politics on this issue.
More than a decade has passed since the first time Republicans in Congress used the issue as a means of gaining policy concessions by pressing the then-Democratic president of the United States on the issue. Democrats see partisan politics on the issue as the economic ruin of the country.
In 2011, the impasse over the issue forced the credit rating agency S&P to downgrade the country's rating for the first time in US history.
Now, many members, including Democrats who have seen this era with their own eyes, want to end the practice forever.
They are calling for a clean measure to raise the debt ceiling—one that is not tied to any other legislative measures.
He says his opponents only worry about the national debt when Democrats are in power. According to him, in the past, when the Trump administration raised the debt ceiling three times, Republican-backed spending and tax cuts increased the national debt by hundreds of billions.
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What types of risks are there?
A default could destroy the country's credibility, hurt global financial markets, and, as US debt is heavily traded there because buying US bonds is traditionally considered a less risky investment.
Although its political consequences are difficult to predict. However, a recent survey shows that opinion is equally divided. A third of the public would blame Biden in such a scenario, a third would blame Republicans and a third were undecided.
If the economy collapses in this impasse, the Democrats—as governors—will have to pay a higher political price.
When unemployment rises and the stock market falls, all this debris will fall on the government. Many Democrats are opposed to short-term concessions to Congress despite the political damage they believe could be reversed. According to him, if they get more majority in Congress next year, then the presidency will come to them, then it is possible to remedy these actions.
If it splits the party, then pressure could be increased on President Biden to back off his stance, angering his party's debt ceiling hardliners, and leaving him politically vulnerable. But maybe weak for future leadership. There are already those in his party who are worried about his ability to hold onto the party for next year.
This is a new challenge for the speaker too.
Republicans are seeking to roll back measures such as expanding federal programs supported by President Joe Biden and Democrats. They want to limit federal spending—or at least cut back on projects that Democrats prioritize.
However, the chances of achieving these goals are low.
With control of one house of Congress, their ability to pass legislation to achieve these goals through the traditional means of negotiation and compromise is limited.
The debt ceiling gives House Republicans a way to get big concessions.
Convincing Democrats on even some of these legislative measures would be a victory for Republicans. However, some hard-line members of the party see the package as the least concession they will accept to raise the debt ceiling.
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What are the risks?
Republicans are playing a dangerous game. Like the Democrats, they are risking an economic crisis that could lead to public criticism of their party and political repercussions at the polls.
The party's margin in the House of Representatives is extremely low. Even a slight change in voter opinion would take the party to a minority in the House.
At the moment, Republicans in the Senate are hoping for a majority next year, but even a small mistake can make a big difference.
If the public sees Republicans as a party of extremists who are unfit to govern, that will emerge as a key message in Joe Biden's re-election campaign.
The economic crisis linked to the debt ceiling is also one of the special challenges for House Speaker Kevin McCarthy. His grip on power in this House is weak. If they show an inclination towards one side in the negotiations, then they may have to lose their position through a motion of no confidence where the next election will be difficult for them.
