Joe Biden‘s trillion dollar spending boost will be used to pay for infrastructure, childcare, education, healthcare and the fight against climate change, and the changes are likely to offer more help to lower and middle-income families. Honourable motives aside, the expenditure is creating spectacular political theatrics in Washington as an impasse on the country’s debt ceiling embeds itself deeper between the Republicans and the Democrats.
“We’ve set a goal, and the goal is achievable. I promise you, I promise you,” the president said on the outskirts of Denver, Colorado on Tuesday.
“It’s going to create great economic growth, reduce inflation, and put people in a place where those beautiful children in the back are never going to have to worry about what we’re worrying about right now.”
While Mr Biden presents as optimistic, Congress returns next week, and his Government will enter something of a dangerous crunch period.
In approximately mid-October, the US Government’s debt could rise to $28.5 trillion, beyond which its Treasury may be unable to go through with such ambitious spending plans.
A plan is being considered by the House speaker, Nancy Pelosi, and the Senate majority leader, Chuck Schumer, which involves suspending the debt ceiling past the 2022 midterm elections in a stopgap bill that would keep the US Government-funded through early December.
The ambitious – to put it lightly – plan to do this would result in the Republicans being dared to block the stopgap funding with a filibuster and prevent it from receiving the 60 votes it would need to pass the Senate.
This would result in a Government shutdown on October 1, leaving the US unable to pay its bills.
The US has nearly always avoided defaulting on debt, and it’s likely some resolution could be made between now and then.
But economists have issued the warning that any failure to raise or suspend the debt limit when tied to the stopgap funding measure would be particularly catastrophic.
It would mean the US would be unable to service its debt obligations in the midst of a potentially non-functional federal government.
The showdown is accelerating after Treasury Secretary Janet Yellen said the US defaulting would cause “irreparable harm” to the economy.
She said in a letter to Nancy Pelosi: “Once all available measures and cash on hand are fully exhausted, the United States of America would be unable to meet its obligations for the first time in our history.”
In a letter to Congress, she said: “At a time when American families, communities, and businesses are still suffering from the effects of the ongoing global pandemic, it would be particularly irresponsible to put the full faith and credit of the US at risk.”
A default could seriously harm America’s credit rating, which will raise interest rates that could cost the US Government billions of dollar, ultimately resulting in higher borrowing costs for American businesses as their rates are benchmarked to Treasury rates.
Democrats have insisted that the need to suspend the debt ceiling was due to the previous Trump administration.
Throughout Donald Trump’s maligned presidency, national debt increased to approximately $8 trillion.
Ms Pelosi said in a recent news conference: “We’re paying the credit card, the Trump credit card.”
Such a dramatic prospect of a shutdown isn’t unusual for the US.
During Barack Obama’s presidency, Standard & Poor’s stripped the US of its triple-A credit rating amid an impasse over the ceiling.
His successor Mr Trump’s much-documented battle for a wall spanning the US-Mexico border led to a prolonged fight in Washington, resulting in a 35-day shutdown between 2018 and 2019, leaving 800,000 federal workers without pay.Internet Explorer Channel Network