Why Republicans Want To Detonate A Financial Nuke Why Republicans Want To Detonate A Financial Nuke

Buy things first and decide later if you want to pay for them – for the average consumer, that’s not a good idea. The appointment at the collection agency would be as sure as amen to the church. In American politics, however, this practice is commonplace. The government spends money and only then does the House of Representatives decide whether it was legal. Periodically, the representatives of the people approve the debt ceiling and thereby sign the National Expenditure Check.

The debt ceiling is more than a strange habit in US policy. This can have extremely dangerous consequences, especially if the opposition has a majority in the House of Representatives. Then it can hold the government hostage and wreak havoc on the global economy and financial markets. This is exactly what the chaotic Grand Old Party (GOP) wants to do. But one after the other.

The T-bonds are like the Swiss franc

US Treasury Bonds, more commonly known as Treasury Bonds (T-Bonds), are the lubricant of the international financial markets. With the US still paying off its debt, T-bonds are as safe as gold or the Swiss franc, only there are many more. However, if these debts are no longer paid off, chaos will erupt in the financial markets and the real economy will be in serious trouble – worldwide. Because the dollar is still the most important currency in the world and the US economy is still the largest.

Seen in this way, the refusal to raise the debt ceiling is an extremely effective weapon for the party that has the majority in the House of Representatives. That is currently the GOP, even if the majority is paper thin. Since the Democrats control the Senate and the White House, the debt ceiling is also the only effective weapon for the Republicans. They can pass laws in the House of Representatives until they’re blue in the face. The senate does not have to respond to this and the president can veto it if necessary.

Treasury Secretary Janet Yellen has now indicated that the US will reach the point where the debt ceiling must be raised again tomorrow. With a few tricks she can ensure that the debts are paid off in June. If no agreement has yet been reached in the House of Representatives, the end is a bull’s eye and the unthinkable is not only conceivable, but also a fact.

The danger that Republicans actually want to detonate the financial atomic bomb is real. Speaker Kevin McCarthy, their leader in the House of Representatives, was known only to take office after 15 rounds of voting. Previously, he had to make extensive pledges to the GOP’s far-right wing, the so-called Freedom Caucus.

This group includes chaotic nihilists like Matt Gaetz or Lauren Boebert and libertarian believers like Roy Chips. Both groups want to avoid a second term of President Joe Biden or any other Democrat at all costs and are prepared to accept the harshest economic fallout. The fact that Speaker McCarthy has apparently already assured them that he wants to follow their will is all the more terrifying.

The current battle for the debt ceiling is the sequel to a movie that flickered across the screens twelve years ago. In the course of the Tea Party, Republicans won a sizable majority in the House of Representatives and forced Barack Obama to implement economically futile austerity measures. A program blackmailed by the GOP cut spending on social programs and the military in 2011. The consequences were unpleasant: the US economy recovered much more slowly from the recession caused by the financial crisis. The US military is greatly weakened.

The situation is currently much more dramatic. “There is no sensible plan,” Jack Lew, a former senior Treasury Department official, told the New York Times. “It’s much more dangerous than ever.”

Trump’s debt orgy was never a problem with the GOP

Republicans are not just playing with fire, they are hypocrites of the worst kind. You can point out that the US national debt has now clearly passed the $30 trillion mark and has reached about 100 percent of gross domestic product. What they do their best to keep secret, however, is the fact that Donald Trump has made a significant contribution to this mountain of debt. Taxes to the super-rich have contributed about $2 trillion to the current deficit. All in all, the government deficit has increased by $4.7 trillion during Trump’s term, not counting the Corona emergency aid.

Trump’s debt orgy was never an issue with the GOP, and the debt ceiling was raised without discussion.

The White House has already said it will not respond to Republican blackmail under any circumstances. It is said that neither social programs nor military spending will be cut. The increase of the Tax and Customs Administration will also be maintained. But what can Biden & Co. do to defuse the financial atomic bomb?

As mentioned, the finance department can at least prevent a payment default for a while by taking emergency measures. Consideration is also being given to a classification based on the relevance of the debt. There is also talk of a proposal that the central bank would buy up the T-bonds whose interest is no longer paid. However, that would mean the end of the independent central bank.

What about the one trillion dollar coin?

The trillion dollar coin keeps popping up in the discussion. In theory, the Treasury could create such a coin, deposit it with the Fed as collateral, and use the credit received to pay off the debt. In practice, however, the White House has ruled out this option on several occasions.

Rather, the Democrats and administration are counting on some moderate Republicans to come to their senses and concede. When retirement and medical checkups fail, when most of the government has to shut down because wages can’t be paid, most Americans, even GOP voters, don’t find it funny anymore.

In the war in Ukraine, Vladimir Putin threatens to use a real nuclear bomb. Republicans are blackmailing the Biden administration with a financial nuke. Both are not only morally reprehensible, but also a real danger. Should the US be unable to pay its debts for the first time in its history, the consequences would be incalculable. Or as Bill Dudley, former president of the Federal Reserve Bank of New York puts it, “You can’t get Humpty Dumpty (the eggheads from ‘Alice in Wonderland’) back together if you can’t pay off your debt.”