Suppose you have a fixed-interest mortgage whose term expires. Then you go to your bank and say, “I’ll only pay you if you lay off at least 100 employees and cut all bonuses.” Sound absurd? It is, but exactly one trial based on this principle is currently taking place in the US Congress – and that is anything but funny.
This absurd spectacle is made possible thanks to a law from 1917. Because of the First World War, it was introduced at the time to better control public expenditure. It states that Congress must not only approve the budget, but also set a debt ceiling. In other words, Congress must also approve expenditures already incurred.
The debt ceiling is a law known only in the US and not understood by non-Americans. No wonder: Republicans are currently using it as blatant blackmail. Because they currently have a narrow majority in the House of Representatives, they only want to raise the debt ceiling if the Biden administration makes huge concessions. Again, to note, these are expenses that have already been incurred, and much of this debt was accrued while Donald Trump was in office.
Why the Democrats want a “clean” rule
The Republicans and their leader, Kevin McCarthy, disguise their naked blackmail in a cloak of virtue. They recently passed legislation that would drastically cut social security contributions and subsidies for renewable energy projects, knowing full well that the Biden administration will never comply. The Democrats, for their part, are pushing for the debt ceiling to be passed “clean,” that is, without restrictions.
The concerns of the Democrats are justified, as they themselves raised the debt ceiling twice during Trump’s term. That makes sense, because every accountant knows that the battle over government spending should take place at the time the budget is approved, not when the expenditure has already been made.
The working method of their gauge Donald Trump shows once again how hypocritical the Republicans work. He openly asked Republicans not to raise the debt ceiling. He was asked about it in last Wednesday’s disastrous CNN Townhall, because as president he had declared that there was no avoiding raising the debt ceiling. He was asked why he had now changed his mind. His answer cannot be surpassed in terms of cynicism. “I was president then,” Trump said. “Now I’m not.”
The suspicion that the Republicans are not interested in paying off the national debt is justified. The extremely tight voting situation in the House of Representatives allows the “crazy” in the ranks of the Grand Old Party (GOP) – Matt Gaetz, Marjorie Taylor Green, Lauren Boebert etc. – to box well above their weight class. You have Speaker McCarthy in your hands because you made sure he had to survive 15 votes to even take office. In addition, he had to agree to a rule that states that an individual member of parliament can request his resignation.
The “mads” want to wreak havoc with Trump. They hope to return to power in 2024. If the debt ceiling is not raised by June 1, chaos is not only possible, but likely.
Treasury Secretary Janet Yellen has already announced that the US Treasury will be empty by then without an increase, and she has also tried all the tricks to avoid a state default. In concrete terms, this means that the US can no longer meet its financial obligations for the first time in its history.
The consequences of a US bankruptcy are unpredictable, but certainly catastrophic. Civil servants, police officers and firefighters are no longer paid, social benefits are no longer paid and debts are no longer paid. The consequences would be a severe economic recession and the destruction of millions of jobs. A serious crisis in the financial system must also be taken into account.
Nor would the crisis be confined to the United States. The US market is of paramount importance to the global economy and nothing works in finance without the dollar. The greenback is the most important currency in the world, processing about 60 percent of all international transactions. Central banks around the world therefore hold large amounts of T-bonds, US Treasury bonds, on their books to finance their country’s imports.
So far they have been able to do this with a clear conscience because, as mentioned, the US has always and reliably fulfilled its financial obligations. If they don’t after June 1, it would be a huge shock to the international financial system – and a huge triumph for China. Beijing has been undermining the position of the dollar for some time now. To China, a US national bankruptcy would be like a birthday, Christmas and Easter falling on the same day. For the West, and therefore also for Switzerland, it would be a disaster. Let’s not forget: the US is our most important trading partner after the EU.
The debt ceiling smear was already carried out in 2011. At the time, Tea Party representatives forced the Barack Obama administration to make concessions. A last-minute agreement was reached and catastrophe averted. The hopes are the same this time around, and there are optimistic signs: Yesterday, leaders of both parties in Congress met with the president for an emergency meeting, and Joe Biden canceled part of his planned trip to Asia.
After the meeting, everyone involved was optimistic. But differences remain, and compared to today’s GOP madmen, the Tea Party were sensible statesmen of the time. And there’s not much time left, the clock is ticking.
Soource :Watson
I am Amelia James, a passionate journalist with a deep-rooted interest in current affairs. I have more than five years of experience in the media industry, working both as an author and editor for 24 Instant News. My main focus lies in international news, particularly regional conflicts and political issues around the world.
