The
US House speaker, Kevin McCarthy, and president Joe Biden said they had a
“productive” discussion on the debt ceiling late on Monday at the White House but that no deal had
been reached, as the government seeks to avoid a potentially
catastrophic economic event.
If the debt limit is not raised, the US government
will default on its bills: a historic first likely to have catastrophic
consequences. Federal workers would be furloughed, global stock markets would
be likely to crash and the US economy would probably drop into recession. The
treasury secretary, Janet Yellen, said this will happen on or around 1 June if
no deal to raise the $31.4tn debt ceiling is reached.
McCarthy leads Republicans demanding harsh spending
cuts in return for raising the ceiling. Democrats fear Republicans are willing to
allow talks to fail whatever the cost, seeing a default as a price worth paying
for beating Biden next year.
Biden has said he will consider spending cuts but
has called Republican proposals “extreme” and “unacceptable”, saying he will
not back subsidies for big energy companies and “wealthy tax cheats” or put
healthcare and food assistance at risk.
-The Guardian
"...The United States is one of a tiny number of nations to impose a hard cap on public borrowing, which in its current aggregate form was first put in place in 1939. Though this is hardly the first time a political party has sought to weaponize the threat of default, Democrats accuse their Republican counterparts of cynically using the mechanism to derail Biden’s agenda and slash public spending through legislation they would otherwise struggle to pass. When in power not long ago, Republicans had far fewer qualms raising the ceiling and blowing past earlier borrowing caps.
ReplyDelete"'The issue here is principle: If you accept the idea that you can, in essence, be held to blackmail with the debt ceiling, it will be done again and again. Not to be crass, but it’s essentially negotiating with terrorists who have taken hostages,' said Dean Baker, an economist at the Center for Economic Policy and Research, a left-leaning think tank, said to my colleagues. 'More and more people in progressive circles are becoming concerned with it.'
"Officials elsewhere are growing concerned about the potential harm caused by the crisis. 'I just cannot believe they would let such a major, major disaster happen of the United States defaulting on its debt,' European Central Bank President Christine Lagarde told CBS News last month. 'This is not possible. I cannot believe this would happen.'
"Biden warned that the standoff is imperiling the United States’ position in the world. Given the centrality of U.S. financial markets, which would tank in the event of a public debt default, the situation has flummoxed analysts elsewhere, who don’t understand why the United States would hamstring itself with an artificial construct like this spending cap..." -Washington Post
"...Through their actions in recent months, House Republicans have made clear that they view the debt ceiling standoff as a hostage situation that they can exploit to advance their political agenda—which includes draconian cuts to social programs and massive handouts to the fossil fuel industry.
ReplyDelete"On Tuesday, just days before the June 1 'X-date,' Rep. Matt Gaetz (R-Fla.) came right out and admitted it, telling reporters that 'my conservative colleagues for the most part support Limit, Save, Grow, and they don't feel like we should negotiate with our hostage.'..." Common Dreams
From Heather Cox Richardson:
ReplyDeleteWhite House press secretary Karine Jean-Pierre informed reporters about the budget negotiations and averting default, calling it a “manufactured crisis.” She called out members of the far-right Freedom Caucus for referring to the full faith and credit of the United States as a hostage, and reiterated that it is the duty of every member of Congress to avert the default that will cost millions of jobs lost, devastate retirement accounts, and throw the United States—and the world—into a recession.
“Let’s be clear about what Republicans are demanding in exchange for doing their job and preventing a default,” she said. “Earlier this year, they put forward an extreme package of devastating cuts that would slash…support for education, law enforcement, food assistance—the list goes on and on and on and on—by what now would be about 30 percent.”
While Jean-Pierre didn’t say it, the Republicans’ insistence that spending is out of control does not reflect reality. In fact, discretionary spending has fallen more than 40% in the past 50 years as a percentage of gross domestic product, from 11% to 6.3%. What has driven rising deficits are the George W. Bush and Donald Trump tax cuts, which will have added $8 trillion and $1.7 trillion, respectively, to the debt by the end of the 2023 fiscal year.
The U.S. is far below the average of the 37 other nations in the Organization for Economic Cooperation and Development, an intergovernmental forum of democracies with market economies, in our tax levies. According to the Center for American Progress, if we taxed at the average OECD level, over ten years we would have an additional $26 trillion in revenue. If we taxed at the average of European Union nations, we would have an additional $36 trillion.
What Jean-Pierre did say is that the Republicans’ demand for cuts in the name of fiscal responsibility and deficit reduction is belied by their protection of tax breaks skewed for the wealthy and corporations. The nonpartisan Congressional Budget Office said those tax cuts would add $3.5 trillion to the debt over the next decade.
As the credit rating of the United States totters, House speaker Kevin McCarthy (R-CA) repeatedly told reporters the debt ceiling crisis is not his fault. Indeed, he cannot corral the votes of members of the right-wing Freedom Caucus, who say they will not agree to raise the debt ceiling unless the Senate passes the extremist bill McCarthy got through the House by assuring party members that it was designed only to increase his bargaining power with Biden and that it would never become law. That passage is a nonstarter for Democrats and also for a number of vulnerable Republicans. And yet without it, McCarthy can’t get the votes he needs from the Freedom Caucus. And yet, the Republicans refuse to work with the Democrats, so the extremists can dictate what the House Republicans do.
We’re right back to the same fight we saw over McCarthy’s speakership, where extremists held the trump cards. “We’re not going to default,” McCarthy insisted.
In contrast, all the House Democrats have backed a discharge petition that would force a bill to increase the debt ceiling to the floor, but they need five Republicans to sign on to it. So far, no Republican has publicly stepped up.